B&L.; Landscapes, Inc. Mini Practice Part I Bil Graham started his career mowing
ID: 2418052 • Letter: B
Question
B&L.; Landscapes, Inc. Mini Practice Part I Bil Graham started his career mowing lawns for neighbors while he was in junior high school. Bill worked summers for the local golf course while he was in high school and after he graduated, he started his own lawn care business, Bill's Lawn Care. In addition to lawn care, he also sells two types of fertilizer. Bill is ready to expand his business and wants to add sprinkler systems to his product offering Larry Miller has an established sprinkler system business and they have agreed to merge their two businesses together. They considered the partnership form of business but have decided to incorporate. You are taking an accounting class at the local community college and have been helping Bll keep the accounting records for his business. He has asked you to stay on and establish and maintain the accounting records for the new company, B&L; Landscapes, Inc. Bill and Larry have hired an attorney and filed the incorporation paperwork with the state of Colorado. In the articles of incorporation, they are authorized to issue 150,000 shares of S1 par value common stock and 5,000 shares of $100 par value, 5%, non-cumulative, non- participating preferred stock. The new corporation will be created on July 1, 2014. The fair value of the assets and liabilities of both companies are as followS: Bill's Lawn ccount Accounts Receivable Insurance ildin ccounts Payable otes Payable(due 4/30 202 5,000 Larry's Sprinkler Systems Accounts Receivable id Insurance 63 24 PM Page 1 of 3Explanation / Answer
Accounts Title & Description post Ref Dr Cr 1-Jul Cash 101 $12,500 Accounts Receivable 110 500 Prepaid Insurance 130 500 Inventory 140 1000 Land 150 8000 Equipment 153 25000 Building 152 7500 Accounts Payable 201 5000 Notes Payable 220 45000 Common Stock 301 $5,000 (Being assets and liabilites incorporated and the difference is common stock issue) Cash 101 10000 Accounts Receivable 110 3000 Prepaid Insurance 130 1000 Inventory 140 5000 Equipment 153 11000 Common Stock 25000 Accounts Payable 201 5000 (Being assets and liabilites incorporated and the difference is common stock issue) Cash (30+20)*100 101 5000 Preferred Stock 301 5000 Balance Sheet on July 1,2014 Assets Cash 101 $27,500 12500+10000+5000 Accounts Receivable 110 3500 Prepaid Insurance 130 1500 Inventory 140 6000 Land 150 8000 Equipment 153 36000 Building 152 7500 Total Assets $90,000 Liabilities Accounts Payable 201 10000 Notes Payable 220 45000 Equity Common Stock 301 30000 Preferred Stock 310 5000 Total Liabilities and Equity 90000 Ans 3 Dividend Payable $2,000 First will pay to preferred stock ($5000*5%) 250 Common Stock 1750 Total common stock shares 30000 Bill Lawn on 5000 shares 291.7 5000/30000*1750 Larry on 25000 shares 1458.3 Preferred Div to bills father is 3000*.05 $150 Preferred Div to Larry mother is 2000*.05 100 Post Ref Dr Cr Ans 4 Retained Earnings 350 2000 Dividend Payable 280 2000 Dividend Payable 280 2000 Cash Dividends 330 2000 Ans 5 Equty section on June, 30 Common Stock 301 30000 Preferred Stock 310 5000 Retained Earnings 350 22500 Less: Dividend Payable -2000 Total 55500
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