On December 1 of the current year, the following accounts and their balances app

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, 71,000 shares issued) $3,550,000 Paid-In Capital in Excess of Par—Preferred Stock 426,000 Common Stock, $35 par (1,000,000 shares authorized, 408,000 shares issued) 14,280,000 Paid-In Capital in Excess of Par—Common Stock 816,000 Retained Earnings 155,710,000 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 $3,406,000, and the land on which it is located, valued at $1,718,000, be acquired in accordance with preliminary negotiations by the issuance of 122,000 shares of common stock , (b) that 40,800 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $3,650,000. The plan was approved by the stockholders and accomplished by the following transactions: May 11 Issued 122,000 shares of common stock in exchange for land and a building, according to the plan. 20 Issued 40,800 shares of preferred stock, receiving $52 per share in cash. 31 Borrowed $3,650,000 from Laurel National, giving a 6% mortgage note.

Explanation / Answer

DEbit Building $ 2,800,000
DEbitLand $ 4,100,000
Credit Capital $ 6,500,000 Common stock of 65,000 @ 100 each
Credit Retained earning $ 400,000 Common stock sold at premium  

Debit Cash $4,000,000

Ccredit Preferred shares $3,750,000
CRedit Retained earning $ 250,000 preferred shares were sold at $80 each ( $5 is premium )

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