Solution to Assignment #2

Solution to Assignment #2 - (20,000) 178,000 Page 3 of 3...

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Page 1 of 3 SOLUTION TO ASSIGNMENT #2 KNIGHTS COMPANY Shareholders’ Equity December 31, 2007 Share Capital Preferred shares, $10, 100,000 shares authorized 4,000 shares issued and outstanding $ 440,000 Common shares, 1,000,000 shares authorized 178,000 shares issued and outstanding 1,703,600 Total share capital 2,143,600 Retained earnings 387,400 Total shareholders’ equity $2,531,000
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Page 2 of 3 Cash Land Dividends Payable (1) 1,800,000 (3) 95,000 40,000 (6) (2) 440,000 89,000 (6) 280,000 (5) 1,960,000 95,000 129,000 Common Shares Preferred Shares 1,800,000 (1) 440,000 (2) 95,000 (3) (5) 191,400 1,703,600 440,000 Contributed Surplus – Common Retained Earnings 30,000 B.B. 200,000 B.B. (5) 30,000 (5) 58,600 (6) 40,000 (6) 89,000 375,000 (7) - 387,400 # of common shares # of preferred shares 60,000 (1) 4,000 (2) (3) 6,000 66,000 × 3 (4) 198,000 (5)
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Unformatted text preview: (20,000) 178,000 Page 3 of 3 (1) Cash 1,800,000 Common shares (60,000 $30) 1,800,000 (2) Cash 440,000 Preferred shares (4,000 $110) 440,000 (3) Land 95,000 Common shares 95,000 (4) No entry (5) Common shares 191,400 Contributed surplus common 30,000 Retained earnings 58,600 Cash (20,000 $14) 280,000 Note: Average cost of common shares before transaction (5): ($1,895,000 / 198,000) = $9.57/share Total cost of repurchased common shares: 20,000 $9.57 = $191,400 Actual spending on stock repurchase: 20,000 $14 = $280,000 Difference: $280,000 - $191,400 = $88,600 $30,000 debited to Contributed Surplus $58,600 (88,600 30,000) debited to Retained Earnings (6) Retained earnings 40,000 Dividends payable to p/s (4,000 $10) 40,000 Retained earnings 89,000 Dividends payable to c/s (178,000 $0.5) $89,000 (7) Net income 375,000 Retained earnings 375,000...
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This note was uploaded on 10/16/2010 for the course ACCO Acco 320 taught by Professor Luohe during the Spring '10 term at Concordia Canada.

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Solution to Assignment #2 - (20,000) 178,000 Page 3 of 3...

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