Prince Dell, Inc., was organized in 2016. At December 31, 2016, the Prince Dell

Question

Prince Dell, Inc., was organized in 2016. At December 31, 2016, the Prince Dell balance sheet reported the following stockholders’ equity:

Prince Dell Inc.

Stockholders’ Equity

December 31,2016

Requirements:

1. During 2017, the company completed the following selected transactions.

Journalize each transaction. Explanations are not required.

a. Issued for cash 1,500 shares of preferred stock at par value.

b. Issued for cash 2,000 shares of common stock at a price of $7 per share.

c. Net income for the year was $78,000, and the company declared no dividends.

Make the closing entry for net income.

2. Prepare the stockholders’ equity section of the Prince Dell balance sheet at December 31, 2017.

Paid-in Capital Preferred stock, 4%, $55 par, 650,000 shares authorized, none issued $0 Common stock, $2 par, 540,000 shares authorized, 62,000 shares issued and outstanding 124,000 Paid-in capital in excess of par—common 42,000 Total paid-in capital 166,000 Retained earnings 28,000 Total Stockholders’ equity $194,00

Explanation / Answer

1.. Account Title Debit Credit a. Cash 82500 Preferred stock 82500 1500*55 b. Cash (2000*7) 14000 Common stock(2000*2) 4000 Paid-in capital in excess of par—Common stock(2000*5) 10000 c. Net Income 78000 Retained earnings 78000 2.. Prince Dell Inc. Stockholders’ Equity December 31,2017 Paid-in Capital Preferred stock, 4%, $55 par, 650,000 shares authorized, 1500 shares issued 82500 Common stock, $2 par, 540,000 shares authorized, 64,000 shares issued and outstanding(124000+4000) 128,000 Paid-in capital in excess of par—common(42000+10000) 52,000 Total paid-in capital 262,500 Retained earnings (28000+78000) 106000 Total Stockholders’ equity 368,500

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