QUESTION 12 Moses Corporation was organized early in 2016. The articles of incor

Question

QUESTION 12
Moses Corporation was organized early in 2016. The articles of incorporation authorize 60,000 shares of $100 par value, 10% cumulative preferred stock and 800,000 shares of $5 par value common stock. The following transactions affecting stockholders’ equity were completed during the first year:

1. Issued 2,000 shares of preferred stock at par value as payment in exchange for legal services.

2. Issued 10,000 shares of common stock at $20 per share and 1,000 shares of preferred stock at par.

3. Exchanged 100,000 shares of common stock for land with an appraised value of $400,000 and a building with an appraised value of $650,000

4. Declared the required cash dividend on preferred stock and a $2 per share dividend on common stock.

5. Closed the $450,000 credit balance in the Income Summary Account.

Required:
a. Prepare journal entries to record these transactions (10 Marks)

Explanation / Answer

Journal entry :

No accounts & explanation debit credit 1 Legal service fees 200000 Preferred Stock 200000 (To record preferred Stock issued) 2 Cash (10000*20+1000*100) 300000 Preferred Stock 100000 Common Stock 50000 Paid in capital in excess of par value-Common Stock 150000 (To record issue common and preferred Stock) 3 Land 400000 Building 650000 Common Stock (100000*5) 500000 Paid in capital in excess of par value-Common Stock 550000 (To record Common Stock) 4 Cash dividend 250000 Preferred dividend payable (3000*100*10%) 30000 Common Dividend payable (110000*2) 220000 (To record dividend declared) 5 Income summary 450000 Retained earnings 450000 (To record close income summary account)

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