Rica Inc
Subject:AccountingPrice: Bought3
Rica Inc. had the following capital structure as at December 31, 2019: Preferred shares, 5% cumulative, 50,000 shares authorized, 18,000 shares issued and outstanding $180,000 Common shares, 1,000,000 shares authorized, 60,000 shares issued and outstanding 360,000 Contributed surplus 45,000 Total contributed capital $585,000 Retained earnings 212,000 Accumulated Other Comprehensive Income 25,000 Total shareholders' equity $822,000 During 2020 Rica reported Net Income of $112,000 and Comprehensive Income of $98,000.
PART 1 Make any required journal entries for the following 2020 transactions. Show calculations.
a) On March 1 the Company repurchased for cancellation 5,000 common shares at the market price of $9 per share.
b) A 4% stock dividend was declared and paid on May 31, 2020. The market value of the common shares on that date was $12.60 a share.
c) On September 30 the Board of Directors declared a $30,000 cash dividend. The dividend declared included the annual dividend on the preferred shares with the balance going to the common shareholders. The Record Date for the dividend was October 15 with a Payment Date of October 31. Record dividends payable to common and preferred shares in separate general ledger accounts.
d) On November 1 the Company issued 10,000 common shares at a price of $14.00 per share. Issue costs of $8,000 were incurred.
PART 2 Incorporating all the above information, make a Statement of Changes in Shareholders' Equity for the year ended December 31, 2020.
PART 3 In addition to the Shareholders Equity amounts disclosed above, the company had outstanding:
a) 14,000 stock options, outstanding since 2018, with an exercise price of $9.00 per share. The average market price for the shares during the year was $12.50
b) $200,000 (200 bonds at $1,000 each) in 5% convertible bonds. Each bond is convertible into 20 common shares. The company's tax rate is 30% Calculate Basic and Diluted Earnings per Share for 2020.
