Red Hat Company began operations in January 2018 and reported the following results of operations for each of its first three years of operations: P240,000 loss; 2020 – P3,900,000 profit. 2018 - P600,000 loss; 2019 - At December 31, 2020, the company's capital accounts were as follows: 9% Cumulative Preference Share Capital, P100 par; 100,000 shares authorized; 60,000 shares issued and outstanding · Ordinary Share Capital, P10 par; 1,000,000 shares authorized; 800,000 shares issued and outstanding P6,000,000 8,000,000 Red Hat Company has never paid a cash or bonus issue and there has been no change in the capital accounts since it began operations.

Red Hat Company began operations in January 2018 and reported the following results of operations for each of its first three years of operations: P240,000 loss; 2020 – P3,900,000 profit. 2018 - P600,000 loss; 2019 - At December 31, 2020, the company's capital accounts were as follows: 9% Cumulative Preference Share Capital, P100 par; 100,000 shares authorized; 60,000 shares issued and outstanding · Ordinary Share Capital, P10 par; 1,000,000 shares authorized; 800,000 shares issued and outstanding P6,000,000 8,000,000 Red Hat Company has never paid a cash or bonus issue and there has been no change in the capital accounts since it began operations.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 8MCQ

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Cary Corporation has 50,000 shares of 10 par common stock authorized. The following transactions took place during 2019, the first year of the corporations existence: Sold 5,000 shares of common stock for 18 per share. Issued 5,000 shares of common stock in exchange for a patent valued at 100,000. At the end of Carys first year, total contributed capital amounted to: a. 40,000 b. 90,000 c. 100,000 d. 190,000
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On January 1, 2019, Kittson Company had a retained earnings balance of 218,600. It is subject to a 30% corporate income tax rate. During 2019, Kittson earned net income of 67,000, and the following events occurred: 1. Cash dividends of 3 per share on 4,000 shares of common stock were declared and paid. 2. A small stock dividend was declared and issued. The dividend consisted of 600 shares of 10 par common stock. On the date of declaration, the market price of the companys common stock was 36 per share. 3. The company recalled and retired 500 shares of 100 par preferred stock. The call price was 125 per share; the stock had originally been issued for 110 per share. 4. The company discovered that it had erroneously recorded depreciation expense of 45,000 in 2018 for both financial reporting and income tax reporting. The correct depreciation for 2018 should have been 20,000. This is considered a material error. Required: 1. Prepare journal entries to record Items 1 through 4. 2. Prepare Kittsons statement of retained earnings for the year ended December 31, 2019.
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