X – AUDIT OF EQUITY

PROBLEM NO.6 – Various equity transactions

Bogo Corporation began operations on January 1, 2010. The company was authorized to
issue 60,000, $10 per value, ordinary shares and 120,000 shares of 10%, $100 par value
convertible preference shares.

In connection with your audit of the company’s financial statements, you noted the following
transactions involving shareholders’ equity during 2010:

Jan.1 Issued 1,500 ordinary shares to corporation promoters in exchange for

equipment valued at $510,000 and services valued at $210,000. The property
costs $270,000 3 years ago and was carried on the promoters’ books at
$150,000.

Jan.31 Issued 30,000 convertible preference shares at $150 per share. Each share can
be converted to five ordinary shares. The corporation paid $225,000 to an
agent for selling the shares.

Feb.15 Sold 9,000 ordinary shares at $390 per share. The corporation paid issue costs
of $75,000.

May.30 Received subscriptions for 12,000 ordinary shares at $450 per share.

Aug.30 Issued 2,100 ordinary shares and 4,200 preference shares in exchanged for a
building with a fair value of $1,530,000. The building was originally
purchased for $1,140,000 by the investors and has a carrying amount of
$660,000. In addition, 1800 ordinary shares were sold for $720,000 cash.

Nov.15 Payments in full for half of the subscriptions and partial payments for the rest
of the subscriptions were received. Total cash received was $4,200,000.
Shares were issued for the fully paid subscriptions. The balance is collectible
next year.

Dec.1 Declared a cash dividend of $10 per share on preference shares, payable on
December 31 to shareholders of record on December 15, and $20 per share
cash dividend on ordinary shares, payable on January 15, 2011 to shareholders
of record on December 15.

Dec.31 Paid the preference share dividend.

Profit for the first year of operations was $1,800,000.

QUESTIONS:

Based on the above and the result of your audit, determine the following as of December 31,

2010:
1. Ordinary share capital

2. Share premium – preference

3. Share premium – ordinary

4. Retained earnings

5. Total equity