How do I prepare journal entries for a b and c? Santana Rey created Business Sol

Question

How do I prepare journal entries for a b and c?

Santana Rey created Business Solutions on October 1,2015. The company has been successful, and Santana plans to expand her business. She believes that an additional $86,000 is needed and is investigating three funding sources. Santana's sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since Santana currently has about $129,000 invested in the business, Cicely's investment will mean that Santana will maintain about 60% ownership, and Cicely will have 40% ownership of Business Solutions. Santana's uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock. Santana's banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years. Required: Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a), (b), and (c).

Explanation / Answer

Journal Entries in Business solutions for initial investment Date Account Titles and Explanations Debit Credit Option 1 Cash account $                        86,000 Common Stock account $                         86,000 (Issue of shares as common stock for cash) Option 2 Cash account $                        86,000 7 % Preferred stock $                         86,000 (issue of 860 numbers of 7% preferred shares @ $ 100 par value for cash) Option 3 Cash account $                        86,000 7% Note payable $                         86,000 (for receipt of 7 % long term note payable)

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