Module 6 Assignment: Shareholders’ Equity

For this assignment, you will apply the concepts learned in Module 6 to analyze and record shareholder equity transactions, including common and preferred stock, dividends, stock splits, and retained earnings. You will perform calculations, journal entries, and analysis to demonstrate your understanding of these topics. You can continue using the accounting simulator from our website, MS Excel, or an inexpensive accounting software if you have access to it.

Assignment Tasks

1. Issuance of Common and Preferred Stock:
   • Record the following stock issuance transactions:
     • Issued 1,000 shares of common stock with a par value of $1 per share at a price of $10 per share.
     • Issued 500 shares of preferred stock with a par value of $10 per share at a price of $50 per share.
   • Prepare the journal entries for the above transactions.
2. Repurchase of Common Stock:
   • Assume the company repurchases 200 shares of its own common stock at $12 per share.
   • Prepare the journal entry for the repurchase of the common stock.
3. Dividends:
   • Assume the company declares a cash dividend of $2 per share on 1,000 outstanding shares of common stock.
   • Prepare the journal entry for the declaration of the dividend.
   • Prepare the journal entry for the dividend payment.
4. Stock Splits:
   • Assume the company declares a 2-for-1 stock split on its 1,000 shares of common stock, which have a par value of $1 per share.
   • Explain the impact of the stock split on the number of shares outstanding and the par value per share.
   • Prepare the necessary disclosures for the stock split in the financial statements.
5. Retained Earnings and Reserves:
   • Assume the company approves $50,000 of its retained earnings for future expansion and creates a general reserve of $30,000.
   • Prepare the journal entry for the appropriation of retained earnings.
   • Prepare the journal entry to create the general reserve.
6. Earnings Per Share (EPS):
   • Calculate the basic and diluted EPS using the following data:
     • Net Income: $100,000
     • Preferred Dividends: $10,000
     • Weighted Average Number of Common Shares Outstanding: 1,000 shares
     • Convertible Bonds: $50,000 (convertible into 500 common shares)
     • Stock Options: 200 options (exercisable at $5 per share, current market price is $10 per share)
   • Provide a brief analysis of the impact of convertible securities on the EPS calculation.

Submission Instructions

Compile your calculations, journal entries, and analysis into a single document. Submit your document in PDF format via the course submission portal.

Additional Activities

• Discussion Post: Share your experience in the course forum, detailing any challenges you faced during the assignment and how you overcame them. Provide feedback on your classmates’ posts.
• Peer Review: Review at least two of your classmates’ submissions and provide constructive feedback. Focus on the accuracy of the calculations and the clarity of the journal entries.

Due Date: One week after completing this module.

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