BAT 4M1 On-Line Course Name: Question 1:

Corporations - Assignment

Hannaman Industries was incorporated in 2009 in Port Perry, ON. The corporation was authorized to issue unlimited shares on no-par value common stock and unlimited shares of $10, cumulative, $100 par-value preferred stock. The Municipality of Scugog donated land worth $420,000 to Hannaman Industries to locate in the town. Twenty thousand shares of the preferred stock were issued for a total of $2,625,000 and 100,000 shares of common stock were issued at $8 per share. During the first 2 years of its existence, Hannaman lost a total of $568,000 and paid no yearly dividends. In 2011 a dividend of $500,000 was paid based on earnings of $1,300,000 and in 2012, the corporation paid a dividend of $319,000 based on earnings of $1,120,000. Show below, the dividend that would be payable each year to the preferred and common shareholders. (10 marks) Preferred Shares 2009 $0.00 2010 $0.00 2011 $160,000.00 2012 $160,000.00 Total Paid $320,000.00

Common Shares

$0.00

$0.00

$340,000.00

$159,000.00

$499,000.00

a) For 2011, prepare the following journal entries: a. Dividend Date of Declaration Aug. 15 (4 marks) Date AUG/1 5 Particulars Cash Dividends-Preferred Stock Cash Dividends-Common Shares Dividends Payable P R Debit $160,000.00 $340,000.00 $500,000. 00 Credit A

b. Dividend Date of Payment Sept. 29 (4 marks) Date SEPT/2 9 Particulars Dividend Payable Cash P R Debit $500,000.00 $500,000. 00 Credit

BAT 4M1 On-Line Course

Corporations - Assignment

b) Based on your calculations in part (a) and the information in the case, what would the balance be in the retained earnings account at the end of 2012? (6 marks) Earnings (1,120,000) Dividends Paid (320,000+499,000) Loss (568,000)= (267,000)

c) Prepare the Shareholders Equity section of the Balance Sheet as at Dec. 31, 2012. (22 marks) Hannaman Industries Partial Balance Sheet Dec.21,2012 Shareholders Equity Contributed Capital $8 Preferred Stock, $100 Par value, 20,000 shares outstanding Common Stock, No-Par value, 100,000 shares outstanding Total Share Capital Additional Share Capital Contributed Capital in Excess of Stated Value- Preferred Stock Total Contributed Capital Retained Loss Total Shareholder's Equity

$2,000,000.0 0 $800,000.00 $2,800,000.0 0 625000 3425000 -267000 $3,158,000.0 0

Question 2: Record the following transactions for Hannaman Industries. The company is authorized to issue 500,000 shares of $2, convertible, $20 par value preferred stock and unlimited shares of no-par common stock. The preferred shares can be converted into common shares at a ratio of 1:10. (44 marks) July 2 Paid $4,000 to the Province of Ontario and $3,700 to the Scugog Law Office to obtain the articles of incorporation and file the necessary documents related to the incorporation of the company. The law office requested to receive common stock instead of cash and 1,000 shares were issued to the law office.

BAT 4M1 On-Line Course Corporations - Assignment July 4 Issued 500 shares of common stock to the promoters of the company. Their fee was $1,500. July 14 July 17 July 20 July 25 July 27 Aug. 15 Date July 2 Issued 200 shares of preferred stock for $47,000 cash. Accepted subscriptions for 10,000 shares of common stock at $3 per share and received a down payment of $12,000. Issued 8,000 shares of common stock in exchange for equipment valued at $20,000. Collected the remaining amount of the stock subscription and issued the common stock. Declare a $2,500 dividend. Pay the dividend owing. Particulars Organization Costs Bank Common Stocks -1,000 shares Organization Costs Common Stocks -500 shares Bank Preferred Stocks Contributed Capital in Excess of Par Value -200 Shares 17 Bank Subscription Receivable - Common Common Stock Subscribed -10,000 Shares Subscribed Equipment Common Stocks -8000 Shares Common Stock Subscribed Common Stocks -1,000 Shares Subscribed Cash Dividend- Preferred Cash Dividend- Common Dividend Payable 12000 18000 30000 20000 20000 30000 30000 500 2000 2500 P R Debit $9,700.00 $7,700.00 2000 1500 1500 47000 4000 43000 Credit

14

20

25

27

BAT 4M1 On-Line Course Corporations - Assignment Aug 15 Dividend Payable Bank

2500 2500

Total Mark

/90