E15.

2 (LO 2, 3, 4) (Subscribed Shares) Callaghan Inc. decided to sell shares to raise

additional capital so that it could expand into the rapidly growing service industry. The
corporation chose to sell these shares through a subscription basis and publicly notified
the investment world. The offering was 40,000 shares at $22 a share. The terms of the
subscription were 35% down and the balance was due at the end of six months. All
shares were subscribed for during the offering period.
Instructions
a.   Prepare the journal entries for the original subscription, the collection of the down
payments, the collection of the balance of the subscription price, and the issuance of
the shares.
b.   Discuss how the Share Subscriptions Receivable account should be presented on
the SFP if it is still outstanding at the end of the reporting period under ASPE and
IFRS.
c.   Discuss how Callaghan should account for the balance in the subscription account
and the amounts already collected if a subscriber defaults before making the final
payment.

E15.3 (LO 2) (Share Issuances and Repurchase) As at December 31, 2019, Cayenne Ltd., a

public company, had 40,000 common shares outstanding. During 2020, Cayenne had
the following transactions.
1.   Issued 6,000 common shares at $29 per share, less $2,000 in costs related to the
issuance of the shares.
2.   Issued 3,750 common shares for land appraised at $130,000. The closing price for
the shares traded on the TSX was $32 per share on the date of issuance.
3.   Purchased and retired 500 of the company's shares at $28 per share. The
repurchased shares have an average issue price per share of $30.
Instructions
a.   Prepare the journal entries to record the three transactions listed.

b.     When shares are repurchased, is the original issue price of those individual
shares relevant? Explain.
E15.5 (LO 2, 4)   (Preferred Dividends) The outstanding share capital of Meadowcrest
Corporation consists of 3,000 preferred shares and 7,000 common shares for which
$280,000 was received. The preferred shares carry a dividend of $7 per share and have
a $100 stated value.
Instructions
Assuming that the company has retained earnings of $95,000 that is to be entirely paid
out in dividends and that preferred dividends were not paid during the two years
preceding the current year, state how much each class of shares should receive under
each of the following conditions.
a.   The preferred shares are non-cumulative and non-participating.
b.   The preferred shares are cumulative and non-participating.
c.   The preferred shares are cumulative and participating. Do not round intermediate
calculations but round answers to the nearest dollar.

d.     Assume that Meadowcrest's current year net income was $90,000. Calculate
the current year payout ratio under each of the conditions above. Round to two
decimal places. Comment on the results of your analysis from the perspective of a
potential investor.

E15.8 (LO 2)   (Dividend Entries) The following data were taken from the SFP
accounts of Bedard Corporation on December 31, 2020:
Current assets
FV-NI investments
Common shares (unlimited authorized, 600,000 shares issued and outstanding)
Contributed surplus
Retained earnings
Instructions
Prepare the required journal entries for the following unrelated events in January 2021.
a.   A 6% stock dividend is declared at their fair value and distributed at a time when
the shares' fair value is $48 per share.
b.   A 4-for-1 stock split is effected.
c.   A dividend in kind is declared on January 8, 2021, and paid on January 28, 2021,
in FV-NI investments. The investments have a carrying amount of $160,000 (fair
value at December 31, 2020) and a January 8 fair value of $165,000.
E15.9 (LO 2) (Stock Split and Stock Dividend) The common shares of Hoover Inc. are
currently selling at $143 per share. The directors want to reduce the share price and
increase the share volume before making a new issue. The per share carrying value is
$34. There are currently 1 million shares issued and outstanding.
Instructions
a.   Prepare the necessary journal entries assuming that:
1.   The board votes a 2-for-1 stock split.
2.   The board votes a 100% stock dividend at the fair value of the shares.
b.   Briefly discuss the accounting and securities market differences between these
two methods of increasing the number of shares outstanding.
E15.12 (LO 2, 3) (Dividends and Shareholders' Equity Section) Falkon Corp. reported the
following amounts in the shareholders' equity section of its December 31, 2019 SFP:
Preferred shares, $8 dividend (10,000 shares authorized, 2,000 shares issued)
Common shares (unlimited authorized, 25,000 issued)
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total
During 2020, the company had the following transactions that affect shareholders'
equity.
1.   Paid the annual 2019 $8 per share dividend on preferred shares and a $3 per
share dividend on common shares. These dividends had been declared on December
31, 2019.
2.   Purchased 3,700 of its own outstanding common shares for $35 per share and
cancelled them.
3.   Issued 1,000 preferred shares at $105 per share (at the beginning of the year).
4.   Declared a 10% stock dividend on the outstanding common shares at their fair
value when the shares were selling for $45 per share.
5.   Issued the stock dividend.
6.   Declared the annual 2020 $8 per share dividend on preferred shares and a $2 per
share dividend on common shares. These dividends are payable in 2021.
The contributed surplus arose from net excess of proceeds over cost on a previous
cancellation of common shares. Total assets at December 31, 2019, were $2,140,000,
and total assets at December 31, 2020, were $2,616,000. The company follows IFRS.
Instructions
a.   Prepare journal entries to record the transactions above.
b.   Prepare the statement of changes in shareholders' equity for the year ended
December 31, 2020. Assume 2020 net income was $450,000 and comprehensive
income was $455,000.
c.   Prepare the December 31, 2020 shareholders' equity section.

d.     Calculate the rate of return on common shareholders' equity and the rate of
return on total assets for 2020. Round to two decimal places. Is Falkon trading on the
equity? Evaluate the results from the perspective of a common shareholder.