King Corporation began operations in January 2015. The charter authorized the following share capital: Preferred shares: 5 percent, $ 25 par value, authorized 40,000 shares.
Common shares: no par value, authorized 100,000 shares.
During 2015, the following transactions occurred in the order given:
a. Issued 20,000 common shares to each of the three organizers. Collected $ 9 cash per share from two of the organizers, and received a plot of land with a small building on it in full payment for the shares of the third organizer and issued the shares immediately. Assume that 30 percent of the non-cash payment received applies to the building.
b. Sold 6,000 preferred shares at $ 25 per share. Collected the cash and issued the shares immediately.
c. Sold 2,000 preferred shares at $ 25 and 2,000 common shares at $ 12 per share. Collected the cash and issued the shares immediately.
d. The operating results at the end of 2015 were as follows:
Revenues ...............$ 330,000
Expenses, including income taxes ..... 240,000
Required:
1. Prepare the journal entries to record each of these transactions and to close the accounts.
2. Write a brief memo explaining how you determined the cost of the land and the building in the first journal entry.
3. Prepare the shareholders’ equity section of the statement of financial position for King Corporation as at December 31, 2015.