Hammond Manufacturing Inc. was legally incorporated on January 2, 2020. Its articles of incorporation granted it the right to isue an unlimited number of common shares and 100,000 shares of $14.0 non-cumulative preferred shares. The following transactions are among those that occurred during the first three years of operations: 2020 Jan. 12 Issued 40,400 common shares at $5.6 each. 20 Issued 3,000 common shares to promoters who provided legal services that helped to establish the company. These services had a fair value of $44,0eee. 31 Issued 88,00e common shares in exchange for land, building, and equipment, which have fair market values of $368,000, $488,000, and $56,e00, respectively. Mar. 4 Purchased equipment at a cost of $8,240 cash. This was thought to be a special bargain price. It was felt that at least $11,600 would normally have had to be paid to acquire this equipment. Dec. 31 During 2020, the company incurred a loss of $104,000. The Income Summary account was closed. 2021 Jan. 4 Issued 3,000 preferred shares at $94 per share. Dec. 31 The Income Summary account was closed. Profit for 2021 was $224,000. 2022 Dec. 4 The company declared a cash dividend of $0.92 per share on the common shares payable on December 18 and also declared the required dividend on the preferred shares. 18 Paid the dividends declared on December 4. 31 Profit for the year ended December 31, 2022, was $226,240. The Income Summary account was closed. 2. Prepare the statement of changes in equity for the year ended December 31, 2022. (Amounts to be deducted should be indicated by a minus sign.) Answer is complete but not entirely correct. HAMMOND MANUFACTURING INC. Statement of Changes in Equity For Year Ended December 31, 2022 Preferred Shares Retained Earnings S 763,040 Os 120,000 Os 1,165,040 Common Shares Total Equity Balance, January 1 Issuance of shares Profit Dividends Balance, December 31 $ 282,000 Os 226,240 O 226.240 O (162.888) O (162,888) O S 282,000 S 763,040 S 183,352 $ 1,228,392 Answer is complete but not entirely correct. HAMMOND MANUFACTURING INC. Equity Section of the Balance Sheet December 31, 2022 Contributed capital: Preferred shares, $14 noncumulative, 100,000 shares authorized, 3,000 shares issued & outstanding Os O $ 282,000 Common shares, unlimited shares authorized, 131,400 shares issued and outstanding 763,040 O $ 1,045,040 183,352 O Total contributed capital Retained earnings Total equity $ 1,228,392 Analysis Component: Determine the net assets of Hammond Manufacturing Inc. for 2020, 2021, and 2022. Is the trend favourable or unfavourable? O Answer is complete but not entirely correct. 2020 2021 2022 Net assets 659,040 Os 1,165,040 O$ 1,228,392 O Trend Favourable

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Hammond Manufacturing Inc. was legally incorporated on January 2, 2020. Its articles of incorporation granted it the right to issue an
unlimited number of common shares and 100,000 shares of $14.0 non-cumulative preferred shares. The following transactions are
among those that occurred during the first three years of operations:
2020
Jan. 12 Issued 40,400 common shares at $5.6 each.
20 Issued 3,000 common shares to promoters who provided legal services that helped
to establish the company. These services had a fair value of $44,000.
31 Issued 88,000 common shares in exchange for land, building, and equipment, which
have fair market values of $368,000, $488,000, and $56,800, respectively.
Mar. 4 Purchased equipment at a cost of $8,240 cash. This was thought to be a special
bargain price. It was felt that at least $11,600 would normally have had to be
paid to acquire this equipment.
Dec. 31 During 2020, the company incurred a loss of $104,000. The Income Summary account
was closed.
2021
Jan. 4 Issued 3,000 preferred shares at $94 per share.
Dec. 31 The Income Summary account was closed. Profit for 2021 was $224,000.
2022
Dec. 4 The company declared a cash dividend of $0.92 per share on the common shares
payable on December 18 and also declared the required dividend on the preferred
shares.
18 Paid the dividends declared on December 4.
31 Profit for the year ended December 31, 2022, was $226,240. The Income Summary
account was closed.
2. Prepare the statement of changes in equity for the year ended December 31, 2022. (Amounts to be deducted should be indicated
by a minus sign.)
O Answer is complete but not entirely correct.
HAMMOND MANUFACTURING INC.
Statement of Changes in Equity
For Year Ended December 31, 2022
Preferred
Common
Shares
Retained
Total
Shares
Earnings
Equity
$ 282,000
Os
$ 763,040
8 S
120,000 Os 1, 165,040 8
Balance, January 1
Issuance of shares
226,240 O
Profit
Dividends
Balance, December 31
226,240 O
(162,888) O
$ 183,352
(162,888) O
$ 1,228,392
282,000
IS
763,040
O Answer is complete but not entirely correct.
HAMMOND MANUFACTURING INC.
Equity Section of the Balance Sheet
December 31, 2022
Contributed capital:
Preferred shares, $14 noncumulative, 100,000 shares authorized, 3,000 shares issued & outstanding
$ 282,000
O
Common shares, unlimited shares authorized, 131,400 shares issued and outstanding
763,040 O
Total contributed capital
$ 1,045,040
Retained earnings
183,352 O
Total equity
$ 1,228,392
Analysis Component:
Determine the net assets of Hammond Manufacturing Inc. for 2020, 2021, and 2022. Is the trend favourable or unfavourable?
O Answer is complete but not entirely correct.
2020
2021
2022
859,040 Os 1,165,040 O $ 1,228,392 O
Net assets
Trend
Favourable
Transcribed Image Text:Hammond Manufacturing Inc. was legally incorporated on January 2, 2020. Its articles of incorporation granted it the right to issue an unlimited number of common shares and 100,000 shares of $14.0 non-cumulative preferred shares. The following transactions are among those that occurred during the first three years of operations: 2020 Jan. 12 Issued 40,400 common shares at $5.6 each. 20 Issued 3,000 common shares to promoters who provided legal services that helped to establish the company. These services had a fair value of $44,000. 31 Issued 88,000 common shares in exchange for land, building, and equipment, which have fair market values of $368,000, $488,000, and $56,800, respectively. Mar. 4 Purchased equipment at a cost of $8,240 cash. This was thought to be a special bargain price. It was felt that at least $11,600 would normally have had to be paid to acquire this equipment. Dec. 31 During 2020, the company incurred a loss of $104,000. The Income Summary account was closed. 2021 Jan. 4 Issued 3,000 preferred shares at $94 per share. Dec. 31 The Income Summary account was closed. Profit for 2021 was $224,000. 2022 Dec. 4 The company declared a cash dividend of $0.92 per share on the common shares payable on December 18 and also declared the required dividend on the preferred shares. 18 Paid the dividends declared on December 4. 31 Profit for the year ended December 31, 2022, was $226,240. The Income Summary account was closed. 2. Prepare the statement of changes in equity for the year ended December 31, 2022. (Amounts to be deducted should be indicated by a minus sign.) O Answer is complete but not entirely correct. HAMMOND MANUFACTURING INC. Statement of Changes in Equity For Year Ended December 31, 2022 Preferred Common Shares Retained Total Shares Earnings Equity $ 282,000 Os $ 763,040 8 S 120,000 Os 1, 165,040 8 Balance, January 1 Issuance of shares 226,240 O Profit Dividends Balance, December 31 226,240 O (162,888) O $ 183,352 (162,888) O $ 1,228,392 282,000 IS 763,040 O Answer is complete but not entirely correct. HAMMOND MANUFACTURING INC. Equity Section of the Balance Sheet December 31, 2022 Contributed capital: Preferred shares, $14 noncumulative, 100,000 shares authorized, 3,000 shares issued & outstanding $ 282,000 O Common shares, unlimited shares authorized, 131,400 shares issued and outstanding 763,040 O Total contributed capital $ 1,045,040 Retained earnings 183,352 O Total equity $ 1,228,392 Analysis Component: Determine the net assets of Hammond Manufacturing Inc. for 2020, 2021, and 2022. Is the trend favourable or unfavourable? O Answer is complete but not entirely correct. 2020 2021 2022 859,040 Os 1,165,040 O $ 1,228,392 O Net assets Trend Favourable
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