Early in the year Bill Barnes and several friends organized a corporation called

Question

Early in the year Bill Barnes and several friends organized a corporation called Barnes Communications, Inc. The corporation was authorized to issue 50,000 shares of $100 par value, 10 percent cumulative preferred stock and 400,000 shares of $2 par value common stock. The following transactions (among others) occurred during the year.

Jan. 6 Issued for cash 20,000 shares of common stock at $14 per share. The shares were issued to Barnes and 10 others.
Jan. 7 Issued an additional 500 shares of common stock to Barnes in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $7,000.
Jan. 12 Issued 2,500 shares of preferred stock for cash of $250,000.
June 4 Acquired land as a building site in exchange for 15,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $15 per share.
Nov. 15 The first annual dividend of $10 per share was declared on the preferred stock to be paid December 20. (Hint: Record the dividend by debting Dividends and crediting Dividends Payable.)
Dec. 20 Paid the cash dividend declared on November 15.
Dec. 31 After the revenue and expenses were closed into the Income Summary account, that account indicated a net income of $147,200.

(a) Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account.
(b) Prepare the stockholder

Explanation / Answer

20__     Jan.6  Cash             Common stock             Additional paid-in capital: Common stock           

  7  Organization costs expense             Common stock             Additional paid-in capital: Common stock       

      12  Cash             Cumulative preferred stock      

   Jun.4  Land             Common stock             Additional paid-in capital: Common stock         Nov.15  Dividends             Dividends payable   

      Dec.20  Dividends payable             Cash          

     31  Income summary             Retained earnings               31  Retained earnings             Dividends    

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