Question

Lodi Company is authorized to issue 100,000 shares of no-par, $6 stated-value common stock and 10,000 shares of 9%, $100 par preferred stock. It enters into the following transactions on December 31:

1.	Accepts a subscription contract to 7,000 shares of common stock at $42 per share and receives a 30% down payment.
2.	Collects the remaining balance of the subscription contract and issues the common stock.
3.	Acquires a building by paying $3,000 cash and issuing 3,000 shares of common stock and 900 shares of preferred stock. Common stock is currently selling at $46 per share; preferred stock has no current market value. The building is appraised at $240,000.
4.	Sells 1,000 shares of common stock at $47 per share.
5.	Sells 900 shares of preferred stock at $112 per share.
6.	Declares a three-for-one stock split on the common stock, reducing the stated value to $2.00 per share.

Required:

Prepare memorandum and journal entries to record the preceding transactions.

Chart of Accounts

CHART OF ACCOUNTS
Lodi Company
General Ledger
ASSETS 111 Cash 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 172 Building 181 Equipment 189 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 305 Preferred Stock 311 Common Stock 312 Common Stock Subscribed 318 Additional Paid-in Capital on Preferred Stock 320 Additional Paid-in Capital on Common Stock 326 Subscriptions Receivable 331 Retained Earnings	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense

General Journal

Prepare journal entries to record the transactions on December 31. Memorandum entry is not recorded. Additional Instruction

PAGE 1PAGE 2

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8

Record items 1 and 2 on page 1 and items 3-5 on page 2

Answer 1

No	Account	Debit	Credit
1	Cash	$   88,200
	Subscriptions receivable	$ 205,800
	Common stock subscribed		$ 294,000
2	Cash	$ 205,800
	Subscriptions receivable		$ 205,800
	Common stock subscribed	$ 294,000
	Common stock		$   42,000
	Additional Paid-in Capital on Common Stock		$ 252,000
3	Building	$ 240,000
	Cash		$     3,000
	Common stock		$   18,000
	Additional Paid-in Capital on Common Stock		$ 120,000
	Preferred stock		$   90,000
	Additional Paid-in Capital on Preferred Stock		$     9,000
4	Cash	$   47,000
	Common stock		$     6,000
	Additional Paid-in Capital on Common Stock		$   41,000
5	Cash	$ 100,800
	Preferred stock		$   90,000
	Additional Paid-in Capital on Preferred Stock		$   10,800
6	Common stock	$   66,000
	Common stock		$   66,000