Question

In: Accounting

In 2018, Elizabeth and some of her friends invested money to start a company named FRIENDZ...

In 2018, Elizabeth and some of her friends invested money to start a company named FRIENDZ Corporation. The following transactions occurred during 2018.

Jan 1                         The corporate charter authorized 70,000 shares of 5%, $100 par value cumulative preferred stock and unlimited shares of $10 par value common stock.

Jan 6                         Issued 200,000 common shares at $16 per share to Elizabeth and other investors

Jan 7                         Issued another 500 common shares to Elizabeth in exchange for her services in organizing the corporation.

Jan 12                       The stockholders agreed that the services were worth $8,000.

Jan 14                       Issued 10,000 common shares in exchange for equipment. The fair market value of the equipment could not be readily determined, but the market price of the common stock on this date was $16 per share.

Nov 15                     The first annual cash dividend on preferred stock was declared

Dec 20                    Paid the dividends declared on preferred stock

Dec 31                      Estimated income tax expense of $38,000. However, the actual amount of income tax due for this period based on tax laws is determined to be $34,000.

FRIENDZ Corporation generated a $125,000 net income (after income tax) during the year. The company uses the retained earnings account to record dividends.

a) Prepare the journal entries to record the above transactions in 2018.

Date

Account Title and Explanation

Debit

Credit

Solutions

Expert Solution

Date Account Title and Explanation Debit Credit
Jan. 1 No Entry            -  
No Entry            -  
Jan. 6 Cash $3,200,000
Common Stock $2,000,000 (200,000 x $10)
Paid-in capital in excess of par value, common stock $1,200,000 (200,000 x $6)
(To record the issue of common stock)
Jan. 7 Company Organization Expenses $8,000
Common Stock $5,000 (500 x $10)
Paid-in capital in excess of par value, common stock $3,000 Balance
(To record the issue of common stock against of service)
Jan. 12 No Entry            -  
No Entry            -  
Jan. 14 Equipment $160,000
Common Stock $100,000 (10,000 x $10)
Paid-in capital in excess of par value, common stock $60,000 Balance
(To record the issue of common stock against of equipment)
Nov 15 No Entry            -  
No Entry            -  
(As the preferred stock are not issued, so no dividend entry)
Nov 15 No Entry            -  
No Entry            -  
(As the preferred stock are not issued, so no dividend entry)
Dec 31 Income Summary $125,000
Retained Earnings $125,000

Related Solutions

Elizabeth is an interior designer who has worked with some of the greats and started her...
Elizabeth is an interior designer who has worked with some of the greats and started her new business as a sole trader on 1 July of the current tax year. She operates from a store in beautiful downtown Toowoomba where she offers design advice and also sells various items to beautify the home. During the current year ended 30 June, Elizabeth advises that her accounts show the following: Sales proceeds received for the sale of items from the store $70...
A woman dies, leaving her only surviving daughter an estate of $50,000.  The money is invested at...
A woman dies, leaving her only surviving daughter an estate of $50,000.  The money is invested at j (4) = 8%.  How many quarterly payments of $1500 will the daughter receive?  What would be the amount of any final payment, were it to be paid 3 months after the last full $1500 installment?
Because friends and neighbors frequently praise her baking skills, Becky plans to start a new business...
Because friends and neighbors frequently praise her baking skills, Becky plans to start a new business baking cakes for customers. She wonders how to determine the cost of her cakes. Assume financial statement data are prepared in accordance with GAAP. 1. Identify the three components of product cost incurred in producing cakes and give examples of each. Also classify the costs as fixed, variable, or mixed. Explain any assumptions you use in determining your costs and classifying them. 2. Explain...
You and a group of friends wish to start a company. You have an idea, and...
You and a group of friends wish to start a company. You have an idea, and you are comparing startup incubators to apply to. (Start up incubators hold classes and help startups to contact venture capitalists and network with one another) Assume funding is normally distributed. Incubator A has a 70% success ratio getting companies to survive at least 4 years from inception. The average venture funding of the 28 companies reaching that 4 year mark, is 1.3 million dollars...
You and a group of friends wish to start a company. You have an idea, and...
You and a group of friends wish to start a company. You have an idea, and you are comparing startup incubators to apply to. (Start up incubators hold classes and help startups to contact venture capitalists and network with one another) Assume funding is normally distributed.                       Incubator A has a 80% success ratio getting companies to survive at least 4 years from inception. The average venture funding of the 28 companies reaching that 4 year mark, is 1.3 million...
You and a group of friends wish to start a company. You have an idea, and...
You and a group of friends wish to start a company. You have an idea, and you are comparing startup incubators to apply to. (Start up incubators hold classes and help startups to contact venture capitalists and network with one another) Assume funding is normally distributed. Incubator A has a 70% success ratio getting companies to survive at least 4 years from inception. The average venture funding of the 28 companies reaching that 4 year mark, is 1.3 million dollars...
You and a group of friends wish to start a company. You have an idea, and...
You and a group of friends wish to start a company. You have an idea, and you are comparing startup incubators to apply to. (Start up incubators hold classes and help startups to contact venture capitalists and network with one another) Assume funding is normally distributed.                      Incubator A has a 70% success ratio getting companies to survive at least 4 years from inception. The average venture funding of the 28 companies reaching that 4 year mark, is 1.3 million...
You and a group of friends wish to start a company. You have an idea, and...
You and a group of friends wish to start a company. You have an idea, and you are comparing startup incubators to apply to. (Startup incubators hold classes and help startups to contact venture capitalists and network with one another) Assume funding is normally distributed. Incubator A has an 80% success ratio getting companies to survive at least 4 years from inception. The average venture funding of the 28 companies reaching that 4-year mark, is 1.3 million dollars with a...
January 2018 Transactions 1 Adele Applegate invested $30,000 in cash to start the business. 2 Adele...
January 2018 Transactions 1 Adele Applegate invested $30,000 in cash to start the business. 2 Adele paid $2,000 for advertisements in a design magazine. 3 Adele purchased office furniture for $4,000 in cash. 4 Adele performed services for $4,200 in cash. 5 Adele paid $375 for the monthly telephone bill. 6 Adele performed services for $2,610 on credit. 7 Adele purchased a fax machine for $575 and paid $175 in cash with the balance due in 30 days. 8 Adele...
A group of your friends from college are planning to start a clothing line company. They...
A group of your friends from college are planning to start a clothing line company. They are in the process of writing their vision statement, mission statement, and values statement. They come to you for examples of companies’ statements you feel they could model theirs from. You offer to give them advice. Write a professional 1-page (300-350 word) email addressing the following areas: A company that has an ideal vision statement. Be sure to include the vision statement and explain...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT