BRIEF EXERCISE 11.

a.
May 2 Cash...................................................................... 30,000
Common Shares (2,000 × $15)................... 30,000

June 15 Cash ..........................................................17,000

Common Shares (1,000 × $17)................... 17,000

Nov. 1 Cash ............................................................6,000

Preferred Shares (200 × $30)...................... 6,000

Dec. 15 Cash ............................................................7,000

Preferred Shares (200 × $35)...................... 7,000

b.
Number Number
of shares of shares
authorized issued
(1) Preferred shares 200,000 400 (200 + 200)
(2) Common shares Unlimited 3,000 (2,000 + 1,000)

LO 2 BT: AP Difficulty: M Time: 10 min. AACSB: Analytic CPA: cpa-t001 CM: Reporting
BRIEF EXERCISE 11.3

a. Average cost of common shares on:

Balance
Common Number of Average
Date Shares Shares Cost

June 8 $300,000 ÷ 30,000 = $10.00

Aug. 19 $90,000 7,500

Bal. $390,000 ÷ 37,500 = $10.40

Nov. 2 $(31,200) (1) (3,000)

Bal. $358,800 ÷ 34,500 = $10.40

Dec. 7 $(41,600) (2) (4,000)

Bal. $317,200 ÷ 30,500 = $10.40

(1) 3,000 shares x average cost $10.40 = $31,200

(2) 4,000 shares x average cost $10.40 = $41,600

b.
June 8 Cash ........................................................................... 300,000
Common Shares.................................................
300,000
Aug. 19 Cash ........................................................................... 90,000
Common Shares.................................................
90,000
Nov. 2 Common Shares (1) above............................................
Contributed Surplus ($31,200 – $ 28,800)........
2,400
Cash...................................................................
28,800

Dec. 7 Common Shares (2) above............................................ 41,600

Contributed Surplus (balance)....................................... 2,400
Retained Earnings......................................................... 8,000
 Cash...................................................................
52,000
LO 2 BT: AP Difficulty: C Time: 15 min. AACSB: Analytic CPA: cpa-t001, cpa-t005
CM: Reporting and Finance

BRIEF EXERCISE 11.6

May 15 Dividends Declared (110,000 × $1.50 ÷ 4).............. 41,250

Dividends Payable........................................... 41,250

June 10 No entry required

30 Dividends Payable.................................................... 41,250

Cash................................................................. 41,250
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CM: Reporting and Finance
 BRIEF EXERCISE 11.12

a. STIRLING FARMS LIMITED

Statement of Retained Earnings
Year Ended December 31, 2024

Retained earnings, December 31, 2023................................................ $510,000

Add: Net income................................................................................. 323,000
833,000
Less: Dividends declared..................................................................... 115,000
Retained earnings, December 31, 2024................................................ $718,000

(Ending retained earnings = Beginning retained earnings + Net income – Dividends declared)

b. If Stirling were a publicly traded corporation, a statement of changes in equity

would be required instead of a statement of retained earnings. It would report the
changes in each of the shareholders’ equity accounts, not just retained earnings.
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EXERCISE 11.5

a. Apr. 2 Cash ..........................................................100,000

Common Shares (5,000 × $20)..................... 100,000
June 15 Dividends Declared (85,000 × $0.25).................... 21,250
Dividends Payable ........................................ 21,250
July 10 Dividends Payable.................................................. 21,250
Cash............................................................... 21,250
Aug. 21 Dividends Declared................................................ 93,500
Stock Dividends Distributable...................... 93,500
((80,000 + 5,000) × 5% x $22 = 4,250 × $22))

(Stock Dividends = Number of shares issued × Market price per share on declaration date)

Sept. 20 Stock Dividends Distributable............................... 93,500

Common Shares........................................... 93,500
Nov. 1 Cash ............................................................75,000
Common Shares (3,000 × $25)..................... 75,000
Dec. 20 Dividends Declared................................................ 27,675
Dividends Payable......................................... 27,675
((80,000 + 5,000 + 4,250 + 3,000) x $0.30 = 92,250 × $0.30)

b. Number of common shares at the end of the year:

80,000 + 5,000 + 4,250 + 3,000 = 92,250
LO 2,3 BT: AP Difficulty: M Time: 20 min. AACSB: Analytic CPA: cpa-t001 CM: Reporting
 PROBLEM 11.2A

a. Transaction entries:

May 5 Cash (750,000 × $4)...................................................... 3,000,000

Common Shares.................................................. 3,000,000

July 1 Cash (35,000 × $40)...................................................... 1,400,000

Preferred Shares.................................................. 1,400,000

Sept. 1 Cash ............................................................................. 270,000

Common Shares (45,000 shares)......................... 270,000
Oct. 1 Cash (250,000 × $5)...................................................... 1,250,000
Common Shares.................................................. 1,250,000

Nov. 16 Common Shares (25,000 x $4.33 below)..................... 108,250

Cash (25,000 x $4).............................................. 100,000
Contributed Surplus ($108,250 – $100,000)....... 8,250

Balance
Common Number of Average
Date Shares Shares Cost
May 5 $3,000,000 750,000
Sept. 1 270,000 45,000
Oct. 1 1,250,000 250,000
$4,520,000 ÷ 1,045,000 = $4.33

Jan. 5 Cash (15,000 × $7)........................................................ 105,000

Common Shares ................................................. 105,000

PROBLEM 11.2A (CONTINUED)

a. (continued)

Mar. 1 Common Shares (10,000 x $4.36 below)..................... 43,600

Contributed Surplus (balance from Nov. 16)................ 8,250
Retained Earnings *...................................................... 8,150
Cash (10,000 x $6.00)......................................... 60,000
*($60,000 – $43,600 – $8,250) = $8,150
Balance
Common Number of Average
Date Shares Shares Cost
May 5 $3,000,000 750,000
Sept. 1 270,000 45,000
Oct. 1 1,250,000 250,000
Nov. 16 (108,250) (25,000)
Jan. 5 105,000 15,000
$4,516,750 ÷ 1,035,000 = $4.36

Mar. 25 Cash (6,000 × $60)........................................................ 360,000

Preferred Shares.................................................. 360,000

Apr. 15 Dividends Declared....................................................... 82,000

Dividends Payable ([35,000 + 6,000] x $2).........
82,000

Apr. 30 No entry required

Closing entries:
Apr. 30 Retained Earnings......................................................... 82,000
Dividends Declared.............................................. 82,000
30 Income Summary.......................................................... 6,000,000
Retained Earnings................................................ 6,000,000
 PROBLEM 11.2A (CONTINUED)

b.
Preferred Shares Dividends Declared
July 1 1,400,000 Apr. 15 82,000 Apr. 30 CE 82,000
Mar. 25 360,000 Apr. 30 Bal. 0
Apr. 30 Bal. 1,760,000
Retained Earnings
Common Shares Mar. 1 8,150
Nov. 16 108,250 May 5 3,000,000 Apr. 30 CE 82,000 Apr. 30 CE 6,000,000
Mar. 1 43,600 Sept. 1 270,000 Apr. 30 Bal. 5,909,850
Oct. 1 1,250,000 CE: Closing entry
Jan. 5 105,000
Apr. 30 Bal. 4,473,150

Contributed Surplus
Mar. 1 8,250 Nov. 16 8,250
Apr. 30 Bal. 0
c. Number of preferred shares:
35,000 + 6,000 = 41,000

Number of common shares:

750,000 + 45,000 + 250,000 – 25,000 + 15,000 – 10,000 = 1,025,000

GRASSLANDS BREWERY CORPORATION

Statement of Financial Position (Partial)
April 30, 2025

Shareholders’ equity
Share capital
$2 Preferred shares, noncumulative, unlimited
number authorized, 41,000 shares issued.............................. $ 1,760,000
Common shares, unlimited number authorized,
1,025,000 shares issued.......................................................... 4,473,150
Total share capital .....................................................6,233,150
Retained earnings .................................................... 5,909,850
Total shareholders’ equity................................................................. $12,143,000

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 PROBLEM 11.7A

a. Transaction entries:
Jan. 15 Dividends Declared (55,000 × $1.25).................... 68,750
Dividends Payable........................................
68,750
31 No entry required
Feb. 15 Dividends Payable.................................................. 68,750
Cash .............................................................
68,750
Apr. 16 Dividends Declared (5,500* × $12)....................... 66,000
Stock Dividends Distributable......................
66,000
*(55,000 × 10% = 5,500)

(Stock Dividends = Number of shares issued × Market price per share at date of declaration)

30 No entry required

May 15 Stock Dividends Distributable............................... 66,000

Common Shares............................................
66,000
Oct. 1 No journal entry (memorandum entry only: 60,500 (55,000 + 5,500)
common shares × 2 = 121,000 common shares)

Closing entries:
Dec. 31 Income Summary................................................... 628,000
Retained Earnings.........................................
628,000
31 Retained Earnings.................................................. 134,750
Dividends Declared......................................
134,750
($68,750 + $66,000 = $134,750)
PROBLEM 11.7A (CONTINUED)

b. CE: Closing entry

Common Shares Retained Earnings

Jan. 1 Bal. 2,200,000 Jan. 1 Bal. 1,420,000
May 15 66,000 Dec. 31 CE 134,750 Dec. 31 CE 628,000
Dec. 31 Bal. 2,266,000 Dec. 31 Bal. 1,913,250

Dividends Declared Accumulated Other Comprehensive Income

Jan. 15 68,750 Dec. 31 CE 134,750 Jan. 1 68,000
Apr. 16 66,000
Dec. 31 Bal. 0

Stock Dividends Distributable

May 15 66,000 Apr. 16 66,000
Dec. 31 Bal. 0
 PROBLEM 11.7A (CONTINUED)

c.
WIRTH CORPORATION
Statement of Changes in Equity
Year Ended December 31, 2024
Accumulated
Other
Common Retained Comprehensive
Shares Earnings Income Total

Balance Dec. 31, 2023 $2,200,000 $1,420,000 $68,000 $3,688,000

Dividends declared (68,750) (68,750)
Declared and issued
stock dividends 66,000 (66,000) 0
Net income 628,000 628,000
Balance Dec. 31, 2024 $2,266,000 $1,913,250 $68,000 $4,247,250

(A stock dividend reduces retained earnings by the number of shares issued × market price per share)
Note that some companies may combine the information above pertaining to cash and stock dividends
and report them on a single line on this statement with a breakdown between the amount of the stock and
cash dividends shown in a note to the financial statements.
PROBLEM 11.7A (CONTINUED)
d. Number of common shares: 55,000 + 5,500 + 60,500 = 121,000

WIRTH CORPORATION
Statement of Financial Position (Partial)
December 31, 2024

Shareholders’ equity
Share capital
Common shares, unlimited number of shares
authorized, 121,000 issued............................................... $2,266,000
Retained earnings........................................................................... 1,913,250
Accumulated other comprehensive income................................... 68,000
Total shareholders’ equity.................................................... $4,247,250
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 PROBLEM 11.8A

a. Weighted Average Number of Shares

Aug. 1 350,000 × 12/12 = 350,000
Oct. 1 (24,000) × 10/12 = (20,000)
Dec. 1 60,000 × 8/12 = 40,000
Feb. 1 10,000 × 6/12 = 5,000
396,000 375,000

b. Basic Earnings per Share

= Income available to common shareholders ÷ Weighted average

number of common shares
= ($1,280,000 – $100,000*) ÷ 375,000
= $3.15
*Preferred dividend: $1 × 100,000 = $100,000
c. A weighted average number of shares is used in the basic EPS calculation because the
issue of shares and other activities affecting the number of shares issued during the period
changes the amount of net assets upon which net income can be earned. Using the number
of shares at a point in time such as year end to calculate basic earnings per share does not
take into account the year’s economic activity and other factors that might have impacted
the number of shares issued during the period.

LO 5 BT: AP Difficulty: M Time: 30 min. AACSB: Analytic CPA: cpa-t001, cpa-t005

CM: Reporting and Finance