The Following Is an Extract from the Balance Sheet as at December

question 28

Essay

The following is an extract from the balance sheet as at December 31, 2020: $\begin{array}{lr}\text { Preferred shares, } \$ 4 \text { per share non-cumulative dividend, redeemable } & \$ 125,000 \\\text { at } \$ 6 \text { per share, } 250,000 \text { authorized, } 25,000 \text { issued and outstanding } & \\\text { Common stock, } 60,000,000 \text { authorized, } 6,000,000 \text { issued and outstanding } & 6,019,233 \\\text { Contributed surplus - preferred shares from repurchase and resales } & 50,000 \\\text { Retained earnings } & 9,281,092 \\\text { Total shareholders' equity } & \$ 15,475,325\end{array}$ The company did not declare dividends on preferred shares in 2019. Transactions in 2020 include the following:
i. March 15: Hewitt purchased 15,000 preferred shares on the stock exchange for $5.25 per share and held these in treasury.
ii. March 28: The company redeemed 5,000 preferred shares directly from shareholders.
iii. July 1: The market price of common shares shot up to $5 per share, so Hewitt decided to split the common shares two to one.
iv. August 1: Hewitt cancelled 14,000 preferred shares that were held in treasury.
v. December 31: The company declared dividends of $0.40 per common share.
Required:
Prepare the journal entries to record the above transactions. The company uses the single-transaction method to account for treasury shares.

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