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:

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 $12,350,000. The plan provided (a) that a building, valued at $3,000,000, and the land on which it is located, valued at $4,400,000, be acquired in accordance with preliminary negotiations by the issuance of 70,000 shares of common stock, (b) that 55,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $3,300,000. The plan was approved by the stockholders and accomplished by the following transactions:

Required:

Journalize the entries to record the foregoing transactions.

For a compound transaction, if an amount box does not require an entry, leave it blank.

May 11. Issued 70,000 shares of common stock in exchange for land and a building, according to the plan.

May 20. Issued 55,000 shares of preferred stock, receiving $30 per share in cash.

May 31. Borrowed $3,300,000 from Laurel National, giving a 6% mortgage note.

Preferred 1% Stock, $25 par (400,000 shares authorized, 140,000 shares issued) $3,500,000 Paid-In Capital in Excess of Par—Preferred Stock 560,000 Common Stock, $100 par (700,000 shares authorized, 290,000 shares issued) 29,000,000 Paid-In Capital in Excess of Par—Common Stock 2,320,000 Retained Earnings 58,000,000

Explanation / Answer

Date Particulars Debit $ Credit $ May 11 Land A/c 3000000 Building A/c 4400000 Common Stock A/c (70000*100) 7000000   Paid-In Capital in Excess of Par—Common Stock 400000 (To record issue of Common Stock) May 20 Cash A/c (55000*30) 1650000 Preferred Stock A/c (55000*25) 1375000   Paid-In Capital in Excess of Par—Preferred Stock (55000* 5) 275000 (To record issue of Preferred Stock) May 31 Cash 3300000 6% Mortgage Note Payable A/c 3300000 ( To record borrow money)

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