11/19/21, 8:43 AM Assignment Print View

Score: 50/50 Points 100 %

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252716656535374&wid=1325271688… 1/5
11/19/21, 8:43 AM Assignment Print View
 
3. Award: 7 out of 7.00 points  

Mady Entertainment Inc. showed the following equity account balances on the December 31, 2019, balance sheet:
 
     
Common shares, unlimited authorized shares, 670,000 shares issued and outstanding $4,690,000
Retained earnings   1,980,000

During 2020, the following selected transactions occurred:

 
Apr. 1 Repurchased and retired 174,000 common shares at $8.20 per share; this is the first retirement recorded by Mady.
June 1 Declared a 2:1 share split to shareholders of record on June 12, distributable June 30.
Dec. 1 Declared a 10% share dividend to shareholders of record on December 10, distributable December 20. The market prices of the
shares on December 1, December 10, and December 20 were $5.20, $4.96, and $5.10, respectively.
  20 Distributed the share dividend declared December 1.
  31 Closed the credit balance of $756,000 in the Income Summary account.

Required:
a. Journalize the transactions above (assuming the retirements were the first ever recorded by Mady Entertainment Inc.). The
company does not use a share dividends account. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field.)

No Date General Journal Debit Credit

1 April 01, 2020 Common shares  1,218,000 

Retained earnings  208,800 

Cash  1,426,800 

2 June 01, 2020 No journal entry required 

3 December 01, 2020Retained earnings  515,840 

Common share dividends distributable  515,840 

4 December 20, 2020Common share dividends distributable  515,840 

Common shares  515,840 

5 December 31, 2020Income summary  756,000 

Retained earnings  756,000 

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252716656535374&wid=1325271688… 2/5
11/19/21, 8:43 AM Assignment Print View

Date Note Disclosure Amount

April 01, 2020 Note disclosure not required  

June 01, 2020 Note disclosure required  992,000 

December 01,
Note disclosure not required  
2020
December 20,
Note disclosure not required  
2020
December 31,
Note disclosure not required  
2020

b. Prepare the equity section on the December 31, 2020, balance sheet.

MADY ENTERTAINMENT INC.

Equity Section of Balance Sheet
December 31, 2020
Contributed capital:
$
Common shares, unlimited shares authorized, 1,091,200 shares issued and outstanding  
3,987,840
Retained earnings  2,011,360 

$
Total equity
5,999,200

References

Worksheet Learning Objective: 13-01 Learning Objective: 13-02 Describe and account for
Describe and account for retirement of shares.
share dividends and share
splits.

Mady Entertainment Inc. showed the following equity account balances on the December 31, 2019, balance sheet:
 
     
Common shares, unlimited authorized shares, 670,000 shares issued and outstanding $4,690,000
Retained earnings   1,980,000

During 2020, the following selected transactions occurred:

 
Apr. 1 Repurchased and retired 174,000 common shares at $8.20 per share; this is the first retirement recorded by Mady.
June 1 Declared a 2:1 share split to shareholders of record on June 12, distributable June 30.
Dec. 1 Declared a 10% share dividend to shareholders of record on December 10, distributable December 20. The market prices of the
shares on December 1, December 10, and December 20 were $5.20, $4.96, and $5.10, respectively.
  20 Distributed the share dividend declared December 1.
  31 Closed the credit balance of $756,000 in the Income Summary account.

Required:
a. Journalize the transactions above (assuming the retirements were the first ever recorded by Mady Entertainment Inc.). The
company does not use a share dividends account. (If no entry is required for a transaction/event, select "No journal entry
required" in the first account field.)

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252716656535374&wid=1325271688… 3/5
11/19/21, 8:43 AM Assignment Print View

No Date General Journal Debit Credit

1 April 01, 2020 Common shares   1,218,000
Retained earnings   208,800
Cash   1,426,800

2 June 01, 2020 No journal entry required  

December 01,
3 Retained earnings   515,840
2020
Common share dividends distributable   515,840

December 20,
4 Common share dividends distributable   515,840
2020
Common shares   515,840

December 31,
5 Income summary   756,000
2020
Retained earnings   756,000

Date Note Disclosure Amount

April 01, 2020 Note disclosure not required  
June 01, 2020 Note disclosure required   992,000
December 01, 2020 Note disclosure not required  
December 20, 2020 Note disclosure not required  
December 31, 2020 Note disclosure not required  

b. Prepare the equity section on the December 31, 2020, balance sheet.

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252716656535374&wid=1325271688… 4/5
11/19/21, 8:43 AM Assignment Print View

MADY ENTERTAINMENT INC.

Equity Section of Balance Sheet
December 31, 2020
Contributed capital:
Common shares, unlimited shares authorized, 1,091,200 shares issued and outstanding   $ 3,987,840
Retained earnings   2,011,360
 
Total equity F
$ 5,999,200

 
Explanation:

a. Apr. 1:
Common Shares = (174,000 × $7.00*) = $1,218,000
Cash (174,000 × $8.20) = $1,426,800
*$4,690,000/670,000 = $7.00 average issue price.

Jun. 1:
Note disclosure to include the following:
2:1 share split; 670,000 − 174,000 = 496,000 × 2 = 992,000 shares issued and outstanding.

Dec 1:
992,000 shares × 10% = 99,200 shares;
99,200 shares × $5.20 = $515,840.
 
b. Calculations:
 
  Number of        
Common
Shares Retained
Outstanding Dollars Earnings Total Equity
Balance at Dec. 31, 2019   670,000    $ 4,690,000    $1,980,000    $ 6,670,000    
Share repurchase   (174,000)    (1,218,000)     (208,800)     (1,426,800)  
Totals   496,000    $ 3,472,000    $1,771,200    $ 5,243,200    
Share split × 2      0      0      0    
Totals   992,000    $ 3,472,000    $1,771,200    $ 5,243,200    
Share Dividend × 1.1      515,840      (515,840)     0    
   1,091,200    $ 3,987,840    $1,255,360    $ 5,243,200    
Profit                 756,000      756,000    
Balance at Dec. 31, 2020  1,091,200    $ 3,987,840    $2,011,360    $ 5,999,200    

https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=3.&postSubmissionView=13252716656535374&wid=1325271688… 5/5