Bravado Corporation had the following shareholders’ equity balances at January 1, 2022:
Preferred shares, $5 dividend (unlimited authorized, 20,000 issued)1 Common shares (unlimited authorized, 115,000 issued)
Contributed surplus – reacquisition of common shares2
Contributed surplus – stock options3
Retained earnings
Accumulated other comprehensive income Total shareholders’ equity
$1,000,000 875,000 34,000 460,000 973,000 (42,000) $3,300,000
Notes:
The preferred shares are cumulative and non-participating. Dividends for 2021
were in arrears at January 1, 2022.
The contributed surplus – reacquisition of common shares arose from net excess
of proceeds over cost on a previous cancellation of common shares.
The contributed surplus – stock options relate to 200,000 options granted to
executives in the past. The stock options are fully vested, and exercisable until December 31, 2022. Each option permits the holder to purchase one common shares for $10.
During 2022, the following transactions affecting shareholders’ equity occurred:
Mar 1 Apr 30
Sep 15 Nov 1 Dec 31
Issued 10,000 common shares for land valued at $125,000 (based on independent valuation). The market price of the shares was $13 each.
Repurchased for cash and cancelled 15,000 common shares at $17 per share (see Note 2 above).
Declared a total dividend of $364,000 (see note 1 above).
A total of 125,000 options were exercised (see Note 3 above)
The total comprehensive income for the year was determined to be $412,000, which included $397,000 of net income.
Required:
a) Prepare journal entries to record the transactions dated (i) March 1, 2022
(ii) April 30, 2022
(iii) November 1, 2022
b) Calculate the dividend declared to the preferred shareholders and to the common shareholders on September 15, 20224
