Lockridge-Priest, Inc., was organized in 2008. At December 31, 2008, the Lockrid

Question

Lockridge-Priest, Inc., was organized in 2008. At December 31, 2008, the Lockridge-Priest balance sheet reported the following stockholders' equity: Requirements 1. During 2009, the company completed the following selected transactions. Journalize each transaction. Explanations are not required. a. Issued for cash 1,000 shares of preferred stock at par value. b. Issued for cash 2,000 shares of common stock at a price of $3 per share. c. Net income for the year was $75,000, and the company declared no dividends. Make the closing entry for net income. 2. Prepare the stockholders' equity section of the Lockridge-Priest balance sheet at December 31, 2009.

Explanation / Answer

Lockbridge - Priest All Amounts in $ Journal Entries 1. a. Cash A/c 50000 To 6% Preferred Stock A/c 50000 b. Cash A/c 6000 To Common Stock A/c 2000 To Paid-up Capital in Excess of Par A/c 4000 c. Net Income A/c 75000 To Retained Earnings A/c 75000 Stockholders' Equity Section Paid - in Capital Preferred Stock, 6%, $ 50 par, 100,000 shares authorised 1,000 shares issued at par 50000 Common Stock, $ 1 par, 500,000 shares authorised 62,000 shares issued 62000 Paid-up Capital in Excess of Par - Common 44000 Total Paid-in Capital 156000 Retained Earnings Opening Balance 25000 Add : Net Income 75000 100000 Total Shareholders' Equity 256000

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