Question 3: (24 markS) Westcock Shipbuilding Ltd. has a December 31 year end. On January 1, 2017, the company had the following shareholder\'s equity accounts Preferred shares, $4 non- cumulative, unlimited number authorized, 7,000 issued Common shares, unlimited number authorized, 150,000 issued Retained earnings Accumulated Other Comprehensive Income $850,000 2,250,000 1,750,000 22,000 Westcock Shipbuilding Ltd. had the following transactions during 2017: Issued 700 preferred shares at $95 per share. Reacquired 5,000 common shares at $16 a share. Announced a 3-for-1 stock split of the common shares. Immediately before the split, the share price was $13 a share. Declared the annual dividend on preferred shares for the shareholders of record on Sep 30, payable on Oct 15 Declared a common share dividend of $0.50 a share for all shareholders of record Nov 30. The dividend is payable on Dec 15 Jan 31 Mar 2 Jun 28 Sep 15 Oct 31 The company reported a profit of $450,000 and other comprehensive income of $15,000 for 2017. Required: a) Prepare journal entries to record all of the transactions b) Prepare the Statement of Changes in Shareholder\'s Equity (HINTS: (a) Use format similar to that shown in Illustration 14-10 on page 747 in the textbook; (b) you will need a column for Preferred shares instead of Contributed Surplus) Solution Journal Entries Date Particulars Debit Credit 31-Jan Cash $66,500.00 Preferred Shares $66,500.00 Preferred Shares being issued 2-Mar Cash $80,000.00 Treasury stock $80,000.00 Common stocks being repurchased 28-Jun No entry required, since stocks do not have any par value 15-Sep Dividends - Preferred $30,800.00 Dividends Payable - Preferred $30,800.00 Preferred dividends at $4 per dividend being declared 30-Sep Dividends Payable - Preferred $30,800.00 Cash $30,800.00 Preferred dividends declared being paid 31-Oct Dividends - Common $217,500.00 Dividends Payable - Common $217,500.00 Common stock dividends being declared 15-Dec Dividends Payable - Common $217,500.00 Cash $217,500.00 Common dividends declared being paid Dividends payable – Preferred = (7,000 + 700) x $4 = $30,800 Dividends payable – Common = (150,000 – 5,000) x $0.50 = $217,500 Stocks repurchased at $16 = 5,000 x $16 = $80,000 Statement of Changes in Shareholders\' Equity Year ended on December 31, 2017 Preferred Share Capital Common Share Capital Treasury Shares Retained Earnings Accumulated Other Comprehensive Income Total Equity Balance at January 1, 2017 $850,000 $2,250,000 $0 $1,750,000 $22,000 $4,872,000 Profit for the year $0 $0 $0 $450,000 $0 $450,000 Other Comprehensive Income $0 $0 $0 $0 $15,000 $15,000 Dividends - Preferred $0 $0 $0 $30,800 $0 $30,800 Dividends - Common $0 $0 $0 $217,500 $0 $217,500 Purchase of Own Shares $0 $0 $80,000 ($80,000) $0 $0 Balance at December 31, 2017 $850,000 $2,250,000 $80,000 $2,368,300 $37,000 $5,585,300 Journal Entries Date Particulars Debit Credit 31-Jan Cash $66,500.00 Preferred Shares $66,500.00 Preferred Shar.

1. Question 3: (24 markS) Westcock Shipbuilding Ltd. has a December 31 year end. On January 1,
2017, the company had the following shareholder's equity accounts Preferred shares, $4 non-
cumulative, unlimited number authorized, 7,000 issued Common shares, unlimited number
authorized, 150,000 issued Retained earnings Accumulated Other Comprehensive Income
$850,000 2,250,000 1,750,000 22,000 Westcock Shipbuilding Ltd. had the following
transactions during 2017: Issued 700 preferred shares at $95 per share. Reacquired 5,000
common shares at $16 a share. Announced a 3-for-1 stock split of the common shares.
Immediately before the split, the share price was $13 a share. Declared the annual dividend on
preferred shares for the shareholders of record on Sep 30, payable on Oct 15 Declared a common
share dividend of $0.50 a share for all shareholders of record Nov 30. The dividend is payable on
Dec 15 Jan 31 Mar 2 Jun 28 Sep 15 Oct 31 The company reported a profit of $450,000 and other
comprehensive income of $15,000 for 2017. Required: a) Prepare journal entries to record all of
the transactions b) Prepare the Statement of Changes in Shareholder's Equity (HINTS: (a) Use
format similar to that shown in Illustration 14-10 on page 747 in the textbook; (b) you will need
a column for Preferred shares instead of Contributed Surplus)
Solution
Journal Entries
Date
Particulars
Debit
Credit
31-Jan
Cash
$66,500.00
Preferred Shares
$66,500.00
Preferred Shares being issued
2-Mar
Cash
$80,000.00
Treasury stock
$80,000.00
Common stocks being repurchased
28-Jun

2. No entry required, since stocks do not have any par value
15-Sep
Dividends - Preferred
$30,800.00
Dividends Payable - Preferred
$30,800.00
Preferred dividends at $4 per dividend being declared
30-Sep
Dividends Payable - Preferred
$30,800.00
Cash
$30,800.00
Preferred dividends declared being paid
31-Oct
Dividends - Common
$217,500.00
Dividends Payable - Common
$217,500.00
Common stock dividends being declared
15-Dec
Dividends Payable - Common
$217,500.00
Cash
$217,500.00
Common dividends declared being paid
Dividends payable – Preferred = (7,000 + 700) x $4 = $30,800
Dividends payable – Common = (150,000 – 5,000) x $0.50 = $217,500
Stocks repurchased at $16 = 5,000 x $16 = $80,000
Statement of Changes in Shareholders' Equity
Year ended on December 31, 2017
Preferred Share Capital
Common Share Capital
Treasury Shares
Retained Earnings
Accumulated Other Comprehensive Income
Total Equity

3. Balance at January 1, 2017
$850,000
$2,250,000
$0
$1,750,000
$22,000
$4,872,000
Profit for the year
$0
$0
$0
$450,000
$0
$450,000
Other Comprehensive Income
$0
$0
$0
$0
$15,000
$15,000
Dividends - Preferred
$0
$0
$0
$30,800
$0
$30,800
Dividends - Common
$0
$0
$0
$217,500
$0
$217,500
Purchase of Own Shares

4. $0
$0
$80,000
($80,000)
$0
$0
Balance at December 31, 2017
$850,000
$2,250,000
$80,000
$2,368,300
$37,000
$5,585,300
Journal Entries
Date
Particulars
Debit
Credit
31-Jan
Cash
$66,500.00
Preferred Shares
$66,500.00
Preferred Shares being issued
2-Mar
Cash
$80,000.00
Treasury stock
$80,000.00
Common stocks being repurchased
28-Jun
No entry required, since stocks do not have any par value
15-Sep
Dividends - Preferred
$30,800.00
Dividends Payable - Preferred

5. $30,800.00
Preferred dividends at $4 per dividend being declared
30-Sep
Dividends Payable - Preferred
$30,800.00
Cash
$30,800.00
Preferred dividends declared being paid
31-Oct
Dividends - Common
$217,500.00
Dividends Payable - Common
$217,500.00
Common stock dividends being declared
15-Dec
Dividends Payable - Common
$217,500.00
Cash
$217,500.00
Common dividends declared being paid
Dividends payable – Preferred = (7,000 + 700) x $4 = $30,800
Dividends payable – Common = (150,000 – 5,000) x $0.50 = $217,500
Stocks repurchased at $16 = 5,000 x $16 = $80,000
Statement of Changes in Shareholders' Equity
Year ended on December 31, 2017
Preferred Share Capital
Common Share Capital
Treasury Shares
Retained Earnings
Accumulated Other Comprehensive Income
Total Equity
Balance at January 1, 2017
$850,000
$2,250,000
$0
$1,750,000

6. $22,000
$4,872,000
Profit for the year
$0
$0
$0
$450,000
$0
$450,000
Other Comprehensive Income
$0
$0
$0
$0
$15,000
$15,000
Dividends - Preferred
$0
$0
$0
$30,800
$0
$30,800
Dividends - Common
$0
$0
$0
$217,500
$0
$217,500
Purchase of Own Shares
$0
$0
$80,000
($80,000)
$0

7. $0
Balance at December 31, 2017
$850,000
$2,250,000
$80,000
$2,368,300
$37,000
$5,585,300