Question

Use information provided below to answer the questions that follow
Lee Corporation is authorized by its article to issue 100000 shares of $10 preferred shares and an unlimited number of common shares. The table below shows the transactions that occurred during the first two years of the company’s operations:



Year 2019
Jan 2 Issued 1000 common shares at $6 per share
Feb 15 Paid the promoters $ 3500 in kind [ 1100 common shares]

April 30 Issued 10000 common shares in exchange for a equipment valued at 32000 and land selling at $75000 but valued at $60000
May 31 Paid $2250 for transporting equipment to the organization
August    31 Sold 3000 preferred shares for cash $70 per share.
Sept    10 Board of directors declared cash dividend of $ 2.40 to common shareholders and the dividend for preferred shares
Dec 31 Paid the dividend both to common shareholder and preferred shareholders
December 31 Closed the account with $22000 on debit balance in the income summary
To the Retained earnings
REQUIRED
(A) Journalize the transactions

(B) Calculate the total equity of the company. Remember equity means all the preferred shares and the common shares issued after deducting the dividend paid.    The company had a retained earning balance of $21000 at the end of 2018

Answer 1

Answer 1)

Jan 2

Bank a\c Dr.                      $6000

To common shares                         $6000

(for common shares issued)

Feb 15

                                             Goodwill a\c Dr.               $3500

                                             To common stock                           $3500

April 30

Equipment a\c Dr.                          $32000

Land a\c Dr.                                      $60000

To common shares                                        $ 92000

(For common shares issued)

May 31

Freight a\c Dr.                  $2250

To bank                                             $2250

(for freight charges paid)

August 31

Bank a\c Dr.                      $210000

To preferred stock                          $210000

Sep 10

Retained Earnings a\c Dr.             $29040

To dividend payable                                      $29040

Dec 31

Dividend Payable a\c Dr.                             $29040

To bank                                                                           $29040

(The above two entries can be repeated for preference shares also, since no data is available regarding the amount of dividend payable )

For common stock no. of shares are (1000+1100+10000)

Answer 2)

The total equity = 6000+ 3500 + 92000 + 210000 – 29040 = 282460