Question

In: Accounting

Questions: 1. Record the transactions in the general journal. 2. Prepare the stockholder's equity section of...

Questions:
1. Record the transactions in the general journal.
2. Prepare the stockholder's equity section of D-Cell's balance sheet at October 31, 2018. Assume D-Cell's net income for the month was $87,000
.

D-Cell Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes D-Cell to issue 110,000 shares of 6%, $50 par value cumulative preferred stock and 100,000 shares of $2 par value common stock. During the first month, D-Cell completed the following transactions:

Oct. 2 - Issued 25,000 shares of common stock for a building with a market value of $110,000
Oct. 6 - Issued 800 shares of preferred stock for $110 per share.
Oct. 9 - Issued 18,000 shares of common stock for cash of $72,000
Oct. 10 - Declared a $21,000 cash dividend for stockholders of record on
Oct. 20. Use separate dividends payable account for preferred and common stock.
Oct. 25 - Paid the cash dividend

Solutions

Expert Solution

Solution 1:

Journal Entries - D-Cell Wireless
Date Particulars Debit Credit
2-Oct Building Dr $110,000.00
      To Common Stock (25000*$2) $50,000.00
      To Paid in capital in excess of par - common stock $60,000.00
(To record issue of shares for purchase of building)
6-Oct Cash Dr (800*$110) $88,000.00
      To Preferred Stock (800*$50) $40,000.00
      To Paid in capital in excess of par - preferred stock (800*$60) $48,000.00
(To record issue of preferred stock)
9-Oct Cash Dr $72,000.00
      To Common Stock (18000*$2) $36,000.00
      To Paid in capital in excess of par - common stock (18000*$2) $36,000.00
(To record issue of common stock)
10-Oct Dividends Dr $21,000.00
      To Dividend Payable - Preferred Stock ($40,000*6%) $2,400.00
      To Dividend Payable - Common Stock $18,600.00
(To record dividend declared)
25-Oct Dividend Payable - Preferred stock Dr $2,400.00
Dividend Payable - Common stock Dr $18,600.00
      To Cash $21,000.00
(To record payment of dividend)

Solution 2:

D Cell Wireless
Balance Sheet - Stockholder's Equity Section
31-Oct-18
Particulars Amount
Stockholders Equity:
Common Stock, $2 par, 100,000 shares authorized, 43,000 shares Issued and outstanding $86,000.00
6% preferred stock, $50 par, 110000 shares authorized, 800 shares issued and outstanding $40,000.00
Paid-in capital in excess of par value—common stock ($60,000 + $36,000) $96,000.00
Paid-in capital in excess of par—preferred stock $48,000.00
Total contributed capital $270,000.00
Retained Earnings (Net Income - Dividend) $66,000.00
Total Stockholder's Equity $336,000.00

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