Prince Dell, Inc., was organized in 2016. At December 31, 2016, the Prince Dell

Question

Prince Dell, Inc., was organized in 2016. At December 31, 2016, the Prince Dell
balance sheet reported the following stockholders’ equity:

Prince Dell Inc.
Stockholders’ Equity
December 31, 2016

Requirements:

1. During 2017, the company completed the following selected transactions. Journalize each transaction. Explanations are not required.
a. Issued for cash 1,500 shares of preferred stock at par value.
b. Issued for cash 2,000 shares of common stock at a price of $7 per share.
c. Net income for the year was $78,000, and the company declared no dividends.
Make the closing entry for net income.

2. Prepare the stockholders’ equity section of the Prince Dell balance sheet at
December 31, 2017.

Paid-in Capital Preferred stock, 4%, $55 par, 650,000 shares authorized, none issued $ 0 Common stock, $2 par, 540,000 shares authorized, 62,000 shares issued and outstanding 124,000 Paid-in capital in excess of par—common 42,000 Total paid-in capital 166,000 Retained earnings 28,000 Total Stockholders’ equity $194,000

Explanation / Answer

Journal Entries: S.No. Accouonts title and explanations Debit $ Credit $ A. Cash Account Ddr. 82500     Preferred Stock capital 82500 B. Cash Account Dr. 14000      Common Stock Capital 4000      Paid in capital in excess of par-Common Stock 10000 C. Income Summary Dr. 78000       Retained earnings 78000 STOCKHOLDER'S EQUITY SECTION: Paid in Capital: Preferred Stock Capital 82500 1500 shares of $ 55 par Common Stock Capital 128000 64000 shares of $2 par Paid in Capital in excess of par-Common 52000 Total paid in capital 262500 Retained Earnings 106000 Total Stockholder's equity 368500

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