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.

---

Definitions:

Full Cost

The total cost of production that includes both direct and indirect costs, such as raw materials, labor, and overhead.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several different investments.

Total Variable Cost

The cumulative cost that varies directly with the level of production or sales volume.

Cost-Plus Pricing

A selling price determination approach where a fixed markup is added to the per unit cost of the product.