Cell Wireless needed additional capital to expand, so the business incorporated.
ID: 2415370 • Letter: C
Question
Cell Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes C - Cell to issue 40,000 shares of 9%, $50 par value cumulative preferred stock, and 130,000 shares of $2 par value common stock. During the first month, C - Cell completed the following transactions: (Qs.) (Click the icon to view the transactions.) Requirements Record the transactions in the general journal. Prepare the stockholders' equity section of C - Cell's balance sheet at October 31, 2014. Assume C - Cell's net income for the month was $91,000.Explanation / Answer
C-Cell wireless issued share during the First Month.
Opening Stock Detail
Paritculars
Number Of Share
Price per Share
Amount
9% Cumulative Preferred Share
40,000 Shares
$ 50 Per Share
2,000,000
Common Stock
130,000 Shares
$ 2 Per Share
260,000
Date
Particulars
Debit
Credit
02-Oct
Common Share Issued
Bank A/c …………………………Dr.
110,000
To Common share capital A/c
38,000
To Security Premium A/c
72,000
(Being 19,000 common shares issued at market value $ 110,000 )
06-Oct
Preferred stock issued.
Bank A/c………………………………. Dr.
72000
To Preferred share capital A/c
45000
To Security Premium A/c
27000
(Being 900 Preferred shares issued @ $ 80 Per share )
09-Oct
Common Share Issued for cash
Cash A/c……………………………….. Dr.
90,000
To Common share capital A/c
30000
To Security Premium A/c
60,000
(Being 15,000 common shares issued at market value $ 90,000 )
10-Oct
Dividend Declared
Common Dividend A/c …………………….Dr.
11,000
To Dividend Payable A/c…………….
11,000
(Being amount of Cash Dividend $ 11,000 Declared on Oct-10)
25-Oct
Dividend Paid
Dividend Payable A/c ……………………Dr.
11,000
To Cash A/c……………………………..
11,000
(Being amount of Dividend Paid)
NOTE: Only Common Stock holder is entitled to get Dividend. Preferred stock holder is entitled to get interest amount.
Hence, Dividend amount will be distributed among common stock holder.
Common Stock As on 31-Oct-2014
Date
Particulars
Shares (No)
Date
Particulars
Shares (No)
To Balance C/d (Opening Stock)
130,000
02-Oct
19,000
09-Oct
15,000
10-Oct
By Balance C/d
164,000
164,000
164,000
Balance Sheet of C-Cell
As On 31st Oct,2014
Liabilities
Amount
Assets
Amount
Share Capital
Non-Current Assets
Common Stock (164000*2)
328000
Non-Current Assets (Balancing Figure)
2,362,000
Preferred Stock {(40000+900)*50}
2045000
Reserve & Surplus
Current Assets
Net Income
91000
Cash & Bank
261,000
Security Premium
159,000
{(110000+72000+90000)-11000}
2,623,000
2,623,000
C-Cell wireless issued share during the First Month.
Opening Stock Detail
Paritculars
Number Of Share
Price per Share
Amount
9% Cumulative Preferred Share
40,000 Shares
$ 50 Per Share
2,000,000
Common Stock
130,000 Shares
$ 2 Per Share
260,000
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