solution

 

 Jude Limited has been authorized to issue 20,000 £100 par value, 10%, non-cumulative preference shares and 1,000,000 no-par ordinary shares. The company assigned a £2.50 stated value to the ordinary shares. On December 31, 2020, the ledger contained the following balances pertaining to equity.

Share Capital—Preference £ 120,000

Share Premium—Preference 12,000

Share Capital—Ordinary 1,000,000

Share Premium—Ordinary 1,600,000

Treasury Shares—Ordinary (1,000 shares) 9,000

Share Premium—Treasury 1,000 Retained Earnings 82,000

The preference shares were issued for land having a fair value of £132,000. All ordinary shares issued were for cash. In November, 1,500 ordinary shares were purchased for the treasury at a per share cost of £9. In December, 500 treasury shares were sold for £11 per share. No dividends were declared in 2020.

Instructions

a. Prepare the journal entries for the:

1. Issuance of preference shares for land.

2. Issuance of ordinary shares for cash.

3. Purchase of treasury shares (ordinary) for cash.

4. Sale of treasury shares for cash.

b. Prepare the equity section on December 31, 2020.