On December 1 of the current year, the following accounts and their balances app
ID: 2423170 • Letter: O
Question
On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor:
Preferred 2% Stock, $50 par (250,000 shares authorized, 82,000 shares issued)
$4,100,000
Paid-In Capital in Excess of Par—Preferred Stock
656,000
Common Stock, $30 par (1,000,000 shares authorized, 402,000 shares issued)
12,060,000
Paid-In Capital in Excess of Par—Common Stock
1,206,000
Retained Earnings
193,830,000
At the annual stockholders’ meeting on March 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $11,000,000. The plan provided (a) that a building, valued at $3,301,000, and the land on which it is located, valued at $692,000, be acquired in accordance with preliminary negotiations by the issuance of 121,000 shares of common stock, (b) that 41,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $3,750,000. The plan was approved by the stockholders and accomplished by the following transactions:
May 11
Issued 121,000 shares of common stock in exchange for land and a building, according to the plan.
20
Issued 41,000 shares of preferred stock, receiving $53 per share in cash.
31
Borrowed $3,750,000 from Laurel National, giving a 6% mortgage note.
Journalize the entries to record the May transactions. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Latte Corp.
General Ledger
ASSETS
110
Cash
120
Accounts Receivable
131
Notes Receivable
132
Interest Receivable
141
Merchandise Inventory
145
Office Supplies
151
Prepaid Insurance
181
Land
191
Building
192
Accumulated Depreciation-Buildings
LIABILITIES
210
Accounts Payable
221
Notes Payable
226
Interest Payable
231
Cash Dividends Payable
236
Stock Dividends Distributable
241
Salaries Payable
261
Mortgage Note Payable
EQUITY
311
Common Stock
312
Paid-In Capital in Excess of Par-Common Stock
315
Treasury Stock
321
Preferred Stock
322
Paid-In Capital in Excess of Par-Preferred Stock
331
Paid-In Capital from Sale of Treasury Stock
340
Retained Earnings
351
Cash Dividends
352
Stock Dividends
390
Income Summary
Journalize the entries to record the May transactions. Refer to the Chart of Accounts for exact wording of account titles.
PAGE 10
JOURNAL
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1
2
3
4
5
6
7
8
9
REVENUE
410
Sales
610
Interest Revenue
EXPENSES
510
Cost of Merchandise Sold
515
Credit Card Expense
520
Salaries Expense
531
Advertising Expense
532
Delivery Expense
533
Selling Expenses
534
Rent Expense
535
Insurance Expense
536
Office Supplies Expense
537
Organizational Expenses
561
Depreciation Expense-Building
590
Miscellaneous Expense
710
Interest Expense
Preferred 2% Stock, $50 par (250,000 shares authorized, 82,000 shares issued)
$4,100,000
Paid-In Capital in Excess of Par—Preferred Stock
656,000
Common Stock, $30 par (1,000,000 shares authorized, 402,000 shares issued)
12,060,000
Paid-In Capital in Excess of Par—Common Stock
1,206,000
Retained Earnings
193,830,000
At the annual stockholders’ meeting on March 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $11,000,000. The plan provided (a) that a building, valued at $3,301,000, and the land on which it is located, valued at $692,000, be acquired in accordance with preliminary negotiations by the issuance of 121,000 shares of common stock, (b) that 41,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $3,750,000. The plan was approved by the stockholders and accomplished by the following transactions:
May 11
Issued 121,000 shares of common stock in exchange for land and a building, according to the plan.
20
Issued 41,000 shares of preferred stock, receiving $53 per share in cash.
31
Borrowed $3,750,000 from Laurel National, giving a 6% mortgage note.
Journalize the entries to record the May transactions. Refer to the Chart of Accounts for exact wording of account titles.
CHART OF ACCOUNTS
Latte Corp.
General Ledger
ASSETS
110
Cash
120
Accounts Receivable
131
Notes Receivable
132
Interest Receivable
141
Merchandise Inventory
145
Office Supplies
151
Prepaid Insurance
181
Land
191
Building
192
Accumulated Depreciation-Buildings
LIABILITIES
210
Accounts Payable
221
Notes Payable
226
Interest Payable
231
Cash Dividends Payable
236
Stock Dividends Distributable
241
Salaries Payable
261
Mortgage Note Payable
EQUITY
311
Common Stock
312
Paid-In Capital in Excess of Par-Common Stock
315
Treasury Stock
321
Preferred Stock
322
Paid-In Capital in Excess of Par-Preferred Stock
331
Paid-In Capital from Sale of Treasury Stock
340
Retained Earnings
351
Cash Dividends
352
Stock Dividends
390
Income Summary
Journalize the entries to record the May transactions. Refer to the Chart of Accounts for exact wording of account titles.
PAGE 10
JOURNAL
DATE
DESCRIPTION
POST. REF.
DEBIT
CREDIT
1
2
3
4
5
6
7
8
9
REVENUE
410
Sales
610
Interest Revenue
EXPENSES
510
Cost of Merchandise Sold
515
Credit Card Expense
520
Salaries Expense
531
Advertising Expense
532
Delivery Expense
533
Selling Expenses
534
Rent Expense
535
Insurance Expense
536
Office Supplies Expense
537
Organizational Expenses
561
Depreciation Expense-Building
590
Miscellaneous Expense
710
Interest Expense
Explanation / Answer
1- land and building debit 3301000
discount on common stock 329000
credit common stock 3630000
2- underwriter debit 2173000
credit preffered stock 2050000
credit additional paid in capital 123000
cash debit 2173000
credit underwriter 2173000
3- cash debit 3750000
credit 6% mortgage notes 3750000
3-
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