Continuing Cookie Chronicle 11 (Part 2) Declares a semiannual dividend to the pr

Question

Continuing Cookie Chronicle 11 (Part 2)

Declares a semiannual dividend to the preferred stockholders of record on November 15, payable on December 1.

Prepare the journal entries to record the above transactions.

Prepare the retained earnings statement for the year.

Prepare the stockholders’ equity section of the balance sheet as of October 31.

Prepare closing entries.

Continuing Cookie Chronicle 11 (Part 2)

Natalie and her friend Curtis Lesperance decide that they can benefit from joining Cookie Creations and Curtis's coffee shop. In this part of the problem, they want your help in preparing financial information following the first year of operations of their new business, Cookie & Coffee Creations.

After establishing their company’s fiscal year-end to be October 31, Natalie and Curtis begin operating Cookie & Coffee Creations Inc. on November 1, 2019. On that date, after the issuance of shares, the paid-in capital section of the company’s balance sheet is as follows.
Paid-in capital      Preferred stock, $0.50 noncumulative, no par value,        10,000 shares authorized, 2,000 shares issued $10,000      Common stock, no par value, 100,000 shares        authorized, 25,930 shares issued 25,930
Cookie & Coffee Creations then has the following selected transactions during its first year of operations.
Dec. 1 Issues an additional 800 preferred shares to Natalie’s brother for $4,000. Apr. 30 Declares a semiannual dividend to the preferred stockholders of record on May 15, payable on June 1. June 30 Repurchases 750 shares of common stock issued to the lawyer, for $500. Recall that these were originally issued for $750. The lawyer had decided to retire and wanted to liquidate all of her assets. Oct. 31 The company has had a very successful first year of operations. It earned revenues of $462,500 and incurred expenses of $364,050 (including $750 legal fee, but excluding income tax). 31 Records income tax expense. (The company has a 20% income tax rate.) 31

Declares a semiannual dividend to the preferred stockholders of record on November 15, payable on December 1.

Prepare the journal entries to record the above transactions.

Prepare the retained earnings statement for the year.

Prepare the stockholders’ equity section of the balance sheet as of October 31.

Prepare closing entries.

Explanation / Answer

1.

2.

1-Dec Cash 4000 Preferred stock-No par value 4000 30-Apr Retained earnings (2800*0.50/2) 700 Preferred dividends payable 700 1-Jun Preferred dividends payable 700 Cash 700 30-Jun Treasury stock 500 Cash 500 31-Oct Revenues 462500 Expenses 364050 Income tax expense(462500-364050)*20% 19690 Retained Earnings(from Income summary) 78760 15-Nov Retained earnings (2800*0.50/2) 700 Preferred dividends payable 700 1-Dec Preferred dividends payable 700 Cash 700 469800 469800

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.