After the books have been closed the ledger of Rotan #653

After the books have been closed, the ledger of Rotan Corporation at December 31, 2014,
contains the following shareholders’ equity accounts:Preferred Shares (20,000 shares issued)
....... $2,000,000Common Shares (500,000 shares issued) ...... 3,325,000Contributed
Capital—purchase of common shares ... 15,000Common Stock dividend distributable ......
175,000Retained Earnings ............... 3,150,000A review of the accounting records reveals the
following:a. Both the common and preferred shares have an unlimited number of shares
authorized.b. The preferred shares are noncumulative with a $10 dividend. The 20,000 shares
were issued on January 15, 2012. No dividend was paid to the preferred shareholders in 2012
or 2013.c. The January 1 balance in Retained Earnings was $ 2,950,000.d. On February 20, the
firm purchased 30,000 common shares for $6 cash per share and cancelled these shares.e. On
October 15, 150,000 common shares were sold for cash at $7 per share.f. A cash dividend of
$780,000 was declared and properly allocated to preferred shares and common shares on
November 1.g. On December 31, a 5% common stock dividend was declared.Requirements1.
Calculate the allocation of the cash dividend to preferred and common shareholders.2.
Calculate (a) the initial common share issuing price per share, (b) the net income, (c) market
price for the common shares on December 31.3. Prepare all necessary journal entries for Rotan
Corporation in 2014.4 Prepare a statement of shareholders’ equity for the year ended
December 31, 2014.View Solution:
After the books have been closed the ledger of Rotan

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