The following transactions relate to the stockholders\' equity transactions of L

Question

The following transactions relate to the stockholders' equity transactions of Lindsay Corporation for 2016, its first year of existence. Articles of incorporation are filed with the state. The state authorized the issuance of 10,000 shares of 6%, $50 par value preferred stock and 200,000 shares of $1 par value common stock. January 28 40,000 shares of common stock are issued for $15 per share. 70,000 shares of common stock are issued in exchange for land and buildings that have a fair market value of $500,000 and $1,000,000 respectively. There is no reliable market value available for the stocks. February 3 February 24 2,000 shares of common stock are issued to the company's attorney in payment for legal services rendered in connection with incorporation. The company charged the amount to organization costs. The market value of the stock was $17 per share. September 12 Received subscriptions for 1,000 shares of preferred stock at $61 per share. A 40% down payment accompanied the subscriptions. The balance is due on November 1, and shares are not issued until fully paid. September 15 Issued 2,000 shares of preferred stock for $62 per share. October 1Declared and paid dividends of $3 per share for preferred stock, and $0.25 per share for common stock. (Debit retained earnings and credit cash.) November 1 Received the final payment for all 1,000 shares of subscribed preferred stock and issued the shares. INSTRUCTIONS: 1) Prepare journal entries for the above transactions. 2) What is the total legal capital for the company at December 31, 2016?

Explanation / Answer

Date Accounts Title and explanation Debit $ Credit $ No entry is required 28-Jan Cash ($15*40000) $600,000 Common stock, $1 par value $40,000 Paid in capital in excess of par value-Common stock $560,000 To Record issuance of Common Stock 03-Feb Land $500,000 Buildings $1,000,000 Common stock, $1 par value $70,000 Paid in capital in excess of par-Common stock $1,430,000 To Record issuance of Common Stock in Exchange of Asset 24-Feb Organisation Cost (2000*$17) $34,000 Common stock, $1 par value $2,000 Paid in capital in excess of par value-Common stock $32,000 To Record issuance of Common Stock 12-Sep Cash (1000*$61*40%) $24,400 Subcription Receivable $36,600 Preferred Stock Prescribed (1000*$50) $50,000 Paid in capital in excess of Par-Preferred Stock (1000*$11) $11,000 To Record Subscription for Preferred stock 15-Sep Cash (2000 *$62) $124,000 Preferred Stock , $50 par value (2000*$50) $100,000 Paid in capital in excess of Par-Preferred Stock (2000*$12) $24,000 To Record Issuance of Preferred Share 01-Oct Retained Earning (2000*$3+112000*0.25) $34,000 Cash $34,000 To Record Dividend Declared & Paid 01-Nov Cash (1000*$61*60%) $36,600 Subscription Receivable $36,600 To Record Final Payment Received 01-Nov Preferred Stock Prescribed $50,000 Preferred Stock $50,000 TO Record Issued Preferred Stock Computation Total ledger Capital For the Compant at Dec 31,2016 Common Stock $112,000 ($40000+$70000+$2000) Preferred Stock $150,000 ($100000+$50000) Paid Up Capital in Excess of Par- Common Stock $2,022,000 ($560000+$1430000+$32000) Paid Up Capital in Excess of Par-Preferred Stock $35,000 (11000+$24000) Total $2,319,000

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