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Account title and Explanation Debit($) Credit($) Cash [5,000 x $30] 1,50,000 a To Common stock [5,000 x $0.01] 50 To Paid-in capital in excess of par 1,49,950 [To record issuance of common stock] Legal Services A/c Dr To Preferred Stock ( 5000*100) b 500000 500000 (To record issue of Preferred Stocks) Land A/c Dr 300000 Building A/c To Common Stock (120000* $0.01) Dr 500000 1200 To Additional Paid in Capital 798800 [To record issuance of common stock] Income summary 6,00,000 Retained earnings 6,00,000 [To close net income] e Preferred Dividend 25000 To Cash 25000 Cash dividends [125,000 x $2] 250000 e То Cash 250000 [To record payment of dividends] d Retained earnings 275000 To Cash Dividends 250000 To Preferred Dividend 25000 (To Close dividend account)

Account title and Explanation Debit($) Credit($) Cash [5,000 x $30] 1,50,000 a To Common stock [5,000 x $0.01] 50 To Paid-in capital in excess of par 1,49,950 [To record issuance of common stock] Legal Services A/c Dr To Preferred Stock ( 5000*100) b 500000 500000 (To record issue of Preferred Stocks) Land A/c Dr 300000 Building A/c To Common Stock (120000* $0.01) Dr 500000 1200 To Additional Paid in Capital 798800 [To record issuance of common stock] Income summary 6,00,000 Retained earnings 6,00,000 [To close net income] e Preferred Dividend 25000 To Cash 25000 Cash dividends [125,000 x $2] 250000 e То Cash 250000 [To record payment of dividends] d Retained earnings 275000 To Cash Dividends 250000 To Preferred Dividend 25000 (To Close dividend account)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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B. Prepare Mulatto Company’s Stockholders equity section of the balance sheet at December 31, 2020. The following information must be clearly stated/shown:

    • information on par values,
    • the number of shares authorized and issued where necessary.
    • the sub total for the total paid in capital.
    • Retained earnings.

total stockholders’ equity.

Part (A) Account title and Explanation Debit($) Credit($) Cash [5,000 x $30] 1,50,000 a To Common stock [5,000 x $0.01] 50 To Paid-in capital in excess of par 1,49,950 [To record issuance of common stock] Legal Services A/c Dr To Preferred Stock ( 5000*100) 500000 500000 (To record issue of Preferred Stocks) Land A/c Dr 300000 Building A/c To Common Stock (120000* $0.01) Dr 500000 1200 To Additional Paid in Capital 798800 [To record issuance of common stock] Income summary 6,00,000 Retained earnings 6,00,000 [To close net income] le Preferred Dividend 25000 То Cash 25000 Cash dividends [125,000 x $2] 250000 le То Cash 250000 [To record payment of dividends] Retained earnings 275000 To Cash Dividends 250000 To Preferred Dividend 25000 (To Close dividend account)
Transcribed Image Text:Part (A) Account title and Explanation Debit($) Credit($) Cash [5,000 x $30] 1,50,000 a To Common stock [5,000 x $0.01] 50 To Paid-in capital in excess of par 1,49,950 [To record issuance of common stock] Legal Services A/c Dr To Preferred Stock ( 5000*100) 500000 500000 (To record issue of Preferred Stocks) Land A/c Dr 300000 Building A/c To Common Stock (120000* $0.01) Dr 500000 1200 To Additional Paid in Capital 798800 [To record issuance of common stock] Income summary 6,00,000 Retained earnings 6,00,000 [To close net income] le Preferred Dividend 25000 То Cash 25000 Cash dividends [125,000 x $2] 250000 le То Cash 250000 [To record payment of dividends] Retained earnings 275000 To Cash Dividends 250000 To Preferred Dividend 25000 (To Close dividend account)
The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020 and that Mulatto Company's charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. Prepare the company's journal entries and statement of owner's equity based on the following information:
Transcribed Image Text:The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020 and that Mulatto Company's charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. Prepare the company's journal entries and statement of owner's equity based on the following information:
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