AP 11–7

Part A

The following transactions occurred during the year:

Jun.

1

Declared a cash dividend of $1 per share to common shareholders of record June 15, payable June 30.

30

Paid the dividend declared June 1.

Dec.

31

Net income for the year amounted to $5,000.

Required:

1.

Compute the book value per share at January 1, 2017.

2.

Prepare journal entries to record the 2017 transactions and closing entries. Descriptions are not necessary.

3.

Prepare the statement of changes in equity for the year ended December 31, 2017.

4.

Compute the stated value and book value per share at December 31, 2017.

Part B

The following transactions occurred during 2018:

Feb.

15

Declared a cash dividend of $1 per share to common shareholders of record March 1, payable March 15.

Mar.

15

Paid the dividend declared February 15.

June

30

Split the common shares 2:1. The new shares are to be issued July 23.

July

23

Issued the new common shares.

Dec.

31

Net income for the year amounted to $8,000.

Required:

5.

Prepare journal entries to record the 2018 transactions, including closing entries. Descriptions are not necessary.

6.

Prepare the statement of changes in equity for the year ended December 31, 2018.

7.

Calculate the book value per share at December 31, 2018.

8.

Assume that the market value of one common share of Pretty Productions Ltd. was $72 on December 31, 2017 and $46.50 on December 31, 2018. Prepare ratios comparing market value to book value for each year.