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Question text The equity section of ABC Corporation’s statement of financial position as of December 31,...

Question text The equity section of ABC Corporation’s statement of financial position as of December 31, 2019 is as follows: Equity Share capital—ordinary, $5 par value; authorized, 2,000,000 shares; issued, 400,000 shares $2,000,000 Share premium—ordinary 850,000 Retained earnings 3,000,000 $5,850,000 The following events occurred during 2020: Jan. 16 Declared a cash dividend of 20 cents per share, payable February 15 to share-holders of record on February 5. Feb. 10 20,000 shares of authorized and unissued ordinary shares were sold for $12 per share. April 1 A two-for-one split was carried out. The par value of the shares was to be reduced to $2.50 per share. Fair value on March 31 was $18 per share. July 1 A 15% share dividend was declared and issued. Fair value is currently $10 per share. Instructions Explain how each event will affect the following: Number of shares Outstanding, Share premium - Ordinary, Retained earnings.

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Answer #1
DATe No. of shareoutstanding Share premium Retained Earnings in $
Jan-16 no effect no effect Decrease -80000
(.2*400000)
Feb-10 Increase by 20000 Increase by $140000 No effect
(20000*(12-5))=140000
Apr-01 420000 No effect No effect
shares are doubled 2:1
Jul-01 Incresae by 126000 Increase by $630000 Decrease by- $1260000
(420000*2)*15% (126000*(10-5)) 126000*10
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