Because Natalie has been so successful with Cookie Creations and Curtis has been

Question

Because Natalie has been so successful with Cookie Creations and Curtis has been just as successful with his coffee shop, they both conclude that they could benefit from each other’s business expertise. Curtis and Natalie next evaluate the different types of business organization, and because of the advantage of limited personal liability, decide to form a new corporation. Curtis has operated his coffee shop for 2 years. He buys coffee, muffins, and cookies from a local supplier. Natalie’s business consists of giving cookie-making classes and selling fine European mixers. The plan is for Natalie to use the premises Curtis currently rents as a location for her cookie-making classes and demonstrations of the mixers that she sells. Natalie will also hire, train, and supervise staff hired to bake cookies and muffins sold in the coffee shop. By offering her classes on the premises, Natalie will save on travel, and the coffee shop will provide one central location for selling the mixers. Combining forces will also allow Natalie and Curtis to pool their resources and buy a few more assets to run their new business venture. The current market values of the assets of both businesses are as follows. Description Curtis’ Coffee Cookie Creations Cash $7,500 $12,000 Accounts receivable 100 500 Merchandise inventory 450 1,130 Equipment 2,500 1,000 $10,550 $14,630 Curtis and Natalie meet with a lawyer and form their corporation, called Cookie & Coffee Creations Inc., on November 1, 2015. The new corporation is authorized to issue 50,000 shares of $1 par common stock and 10,000 shares of no par, $6 cumulative preferred stock. The assets held by each business will be transferred into the corporation at current market value of $1 per share. Curtis will receive 10,550 common shares, and Natalie will receive 14,630 common shares in the corporation.

I have solved the two previous parts (but included them if you need any of the information), I'm just having a difficult time figuring out the last part-OPENING BALANCING SHEET. If you have the steps to figure out RETAINED EARNINGS & TOTAL STOCKHOLDERS' EQUITY, I would really appreciate it. There's a second part to this problem, but I will post it separately.

PART 1

PART 2

PART 3

Prepare the journal entries required on November 1, 2015, the date when Natalie and Curtis transfer the assets of their respective businesses into Cookie & Coffee Creations Inc. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation Nov. 1 Cash 19,500 Accounts Receivable 600 Inventory 1,580 Equipment 3,500 Common Stock 25,180

Explanation / Answer

Cookie & Coffee Creations Inc has taken services of a lawyer which is recorded as Misc Expense by you in Journal entry of $750 which is an item of Profit & Loss A/c.

Since we are not given with any revenue information So there would be a negative balance of retained earnings which is $750.

Now the Opening Balancesheet would appear like :

Cash 29500 AR 600 Inventory 1580 Total Current Assets 31680 Equipment 3500 35180 Preferred Stock 10000 Common Stock 25930 Total Capital Stock 35930 Retained Earnings -750 Total Shareholder's Equity 35180

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