Question

Fast Cars Inc. was authorized to issue 50,000 $1.50 preferred shares and 300,000 common shares. During 2020, its first year of operations, the following selected transactions occurred:

Jan.	1	4,300 of the preferred shares were issued at $13.00 per share; cash.
Feb.	5	15,000 of the common shares were issued for a total of $119,000; cash.
Mar.	20	3,000 of the common shares were given to the organizers of the corporation regarding their efforts. The shares were valued at a total of $28,100.
May	15	11,300 preferred shares and 16,500 common shares were issued at $13.10 and $9.50 respectively; cash.
Dec.	31	The Income Summary account was closed; it showed a debit balance of $322,000. December 31 is Fast Car’s year-end.

Required:
a. Journalize the above transactions.

b. Prepare the equity section of Fast Car’s balance sheet at December 31, 2020. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Date	General Journal	Debit	Credit
Jan.1	Cash (4,300*$13)	$55,900
	Preferred shares		$55,900
	(To record issue of preferred shares for cash)
Feb.5	Cash	$119,000
	Common shares		$119,000
	(To record issue of common shares for cash)
Mar.20	Organization / Promoters costs	$28,100
	Common stock		$28,100
	(To record issue of common shares issued to promoters)
May.15	Cash	$304,780
	Preferred shares (11,300*$13.10)		$148,030
	Common shares (16,500*$9.50)		$156,750
	(To record issue of preferred shares& common shares for cash)
Dec.31	Retained earnings	$332,000
	Income summary		$332,000
	(Entry to record transfer of loss to retained earnings)

2)

Equity section
Common shares-300,000 shares authorized
34,500 shares issued	$          303,850
$1.50 preferred shares -50,000 shares authorized
15,600 shares issued	$          203,930
Total Paid in capital	$          507,780
Retained earnings balance	$       (322,000)
Total shareholders equity	$          185,780