Early in the year Bill Barnes and several friends organized a corporation called

Question

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 percent cumulative preferred stock and 400,000 shares of $2 par value common stock. The following transactions (among others) occurred during the year:

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

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.

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 to be valued for purposes of this transaction at $15 per share.

The first annual dividend of $10 per share was declared on the preferred stock to be paid December 20. (Hint: Record the dividend by debiting Dividends and crediting Dividends Payable.)

After the revenue and expenses were closed into the Income Summary account, that account indicated a net income of $147,200.

Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account. (Omit the "$" sign in your response.)

Prepare the stockholders' equity section of the Barnes Communications, Inc., balance sheet at December 31. (Negative amounts should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

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 to 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. (Hint: Record the dividend by debiting Dividends and crediting Dividends Payable.)

Dec. 20 Paid the cash dividend declared on November 15. Dec. 31

After the revenue and expenses were closed into the Income Summary account, that account indicated a net income of $147,200.

Explanation / Answer

Stockholders' equity
10% cumulative preferred stock, $100 par, authorized
50,000 shares, 2,500 issued and outstanding shares
250,000
Common stock, $2 par, authorized 400,000 shares issued and
70,900
outstanding 35,450 shares
Additional -Paid-In-Capital
Preferred Stock
50,000
Common Stock
391,000
Treasury Stock
150
Total paid-in-capital
762,050
Retained Earnings
181,075
Less: Treasury Stock ( 50 shares)
(850)
Total Stockholders' Equity
942,275

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