Lockridge-Priest, Inc. was organized in 2009. At December 31, 2009, the Lockridg

Question

Lockridge-Priest, Inc. was organized in 2009. At December 31, 2009, the Lockridge-Priest balance sheet reported the following stockholder's equity: -Paid in Capital: -Preferred stock, 5%, $45 par, 140,000 shares authorized, none issue $0 -Common stock, $2, 525,000 shares authorized, 62,000 shares issue & outstanding 124,000 -Paid in capital in excess of par common 42,000 - _________ Total paid in capital $166,000 - Retained earning 28,000 __________ -Total stockholder's equity $194,000 REQUIREMENTS: 1) During 2010, the company complete the following selected transactions. Journalize each transaction. a) Issued for cash 1,400 shares of preferred stock at par value. b) Issued for cash 2,300 shares for common stock at a price of $3 per share. c) Net income for the year was $79,000, and the company declared n dividends. make the closing entry for net income. 2) Prepare the stockholder's equity section of the Lockridge-Priest balance sheet at December 31, 2010.

Explanation / Answer

a) Issued for cash 1,400 shares of preferred stock at par value. Cash Dr. 63000 (1400*45) Preferred stock Cr. 63000 b) Issued for cash 2,300 shares for common stock at a price of $3 per share. Cash Dr. 6900 (2300*3) Common stock Cr. 4600 (2300*2) Paid in capital -- in excess of par Cr. 2300 (6900-4600) c) Net income for the year was $79,000, and the company declared n dividends. make the closing entry for net income. Income summary Dr. 79000 Retained earnings Cr. 79000 2) Prepare the stockholder's equity section of the Lockridge-Priest balance sheet at December 31, 2010. Paid in Capital: Preferred stock (5%, $45 par, 140,000 shares authorized, 1400 issue) $63000 Common stock ($2, 525,000 shares authorized, 64300 shares issue & outstanding) 128600 Paid in capital in excess of par common 44300 Total paid in capital $235900 Retained earning 107000 Total stockholder's equity $342900

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