Question

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Lodi Company is authorized to issue 100,000 shares of no-par, $6 stated-value common stock and 10,000...

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

Solutions

Expert Solution

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

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