Question

5.    Early in the year Bill Barnes and several friends organized a corporation called Barnes Communications, Inc. The corporation was authorized to issue 50,000 shares of $100 par value, 10% cumulative preferred stock and 400,000 shares of $2 par value common stock. The following transactions (among others) occurred during the year:

Jan. 6   Issued for cash 20,000 shares of common stock at $14 per share. The shares were issued to Barnes and 10 other investors.

Jan. 7   Issued an additional 500 shares of common stock to Barnes in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $7,000.

Jan. 12 Issued 2,500 shares of preferred stock for cash of $250,000.

June 4 Acquired land as a building site in exchange for 15,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was be valued for purposes of this transaction at $15 per share.

Nov. 15 The first annual dividend of $10 per share was declared on the preferred stock to be paid December 20.

Dec. 20 Paid the cash dividend declared on November 15.

Dec. 31 After the financial statements were prepared, the net income for the year   was $147,200.

a.    Prepare journal entries to record the above transactions.

b.    Prepare the stockholders’ equity section of the Barnes Communications, Inc. balance sheet at December 31, 2016.

Answer 1

date	Accounts Title	Dr	Cr
6-Jan	Cash (20000*14)	$280,000
	Common stock (20000*2)		$40,000
	Paid in capital in excess of par-Common stock		240000
7-Jan	Organization expenses	7000
	Common stock (500*2)		$1,000
	Paid in capital in excess of par-Common stock		6000
12-Jan	Cash	$250,000
	Preferred stock (20000*2)		$250,000
4-Jun	Land	$225,000
	Common stock (15000*2)		$30,000
	Paid in capital in excess of par-Common stock		195000
	(15000*13)
15-Nov	Cash dividend	$25,000
	Preferred dividend payable (2500*10)		$25,000
20-Dec	Preferred dividend payable (2500*10)	$25,000
	Cash		$25,000
31-Dec	Income Summary	$147,200
	Retained Earnings		$147,200
	Stockholder Equity
	Preferred Stock	250000
	Common stock	$71,000
	Paid in capital in excess of par-Common stock	441000
	Total paid in capital	762000
	Retained Earnings (147200-25000)	$122,200
	Total stockholder equity	$884,200