SOLVED

13.6Â Â Comprehensive Questions 1) BA Paint Ltd. was incorporated on January 1, 2019. The incorporation documents authorized an unlimited number of common shares and 200,000 preferred shares. During the following fiscal year, the company engaged in the following transactions relating to its equity: On January 1, the company issued 20,000 no par value common shares at $10 per share. On the same day, it issued 5,000 preferred shares for proceeds of $120 per share. These preferred shares have a par value of $100 per share and cumulative dividends of 6% per year. On March 20, the company issued an additional 20,000 common shares at $20 per share. On April 30, BA Paint Ltd. repurchased and cancelled 2,000 common shares at a cost of $12 per share. On September 1, the company issued stock options to its executives. These stock options entitle the executives to purchase up to 10,000 common shares at a price of $25 per share over the next five years. The board of directors intended the options to compensate for management’s services for the eight months from January 1 to August 31, 2019. Compensation consultants have estimated the value of these options to be $20,000. On September 2, the company repurchased and cancelled 2,000 shares at $22 per share. For the fiscal year ended December 31, 2019, the company had net income of $130,000 and zero other comprehensive income. The board of directors declared the 6% dividends payable to preferred shareholders and $20,000 of dividends for the common shareholders. ?To analyze these transactions, it is often useful to use a spreadsheet. Similar to inventory accounting, it is necessary to keep track of both the dollar amounts and the number of units (shares). In addition, it is necessary to separate the equity components among common and preferred shares, any contributed surplus for each class of shares, as well as retained earnings. Required: 1.Provide the journal entries for each of these transactions. 2.Prepare a statement of changes in equity. Note: AOCI from revaluations during 2019 was $250.