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. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information. Issued 45,500 shares of common stock. Stock has par value of 0.30 per share and was issued at $30 per share. Issued 8, 000 shares of preferred stock at par value as payment in exchange for legal services. Exchanged 160,000 shares of common stock for land with an appraised value of $400,000.00 and a building with an appraised value of $650,000.00. Earned Net income $650,000.00 Paid dividends to preferred shareholders as well as $2 per share to common stockholders. 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information.

Issued 45,500 shares of common stock. Stock has par value of 0.30 per share and was issued at $30 per share.
Issued 8, 000 shares of preferred stock at par value as payment in exchange for legal services.
Exchanged 160,000 shares of common stock for land with an appraised value of $400,000.00 and a building with an appraised value of $650,000.00.
Earned Net income $650,000.00
Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

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.

Journal entries for the transactions are:
Account Title
Debit
$ 1,365,000
Credit
1 Cash
Common Stock (45,500 x $0.30)
Additional paid-in Capital-Common stock (45,500 x $29.70)
2 Legal Expenses (8,000 x $100)
Preferred stock
3 Land
$
13,650
$ 1,351,350
$
800,000
800,000
400,000
Building
650,000
Common Stock (160,000 x $0.30)
Additional paid-in Capital-Common stock
4 Income summary
Retained Earnings
5 Preferred dividend ($800,000 x 5%)
Common stock dividend (205,500 x $2)
Cash
6 Retained Earnings
Preferred dividend
Common stock dividend
48,000
$ 1,002,000
650,000
650,000
40,000
411,000
451,000
451,000
40,000
411,000
%24
%24

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