Question: Three people Baker Adams and Nelson organized Dog Eared Book Shoppe Inc The

Three people—Baker, Adams, and Nelson—organized Dog-Eared Book Shoppe, Inc. The charter of this corporation authorizes capital consisting of the following:
a. 2,600 shares of preferred 9 percent stock, $ 50 par value
b. 25,000 shares of common stock, $ 15 par value
During its first year of operations, Dog-Eared Book Shoppe, Inc., completed the following transactions that affected stockholders’ equity:
June 1 Issued to Baker 4,000 shares of common stock, at par, for cash.
2 Bought equipment from Adams for $ 45,000. Adams accepted 3,000 shares of common stock in exchange for the equipment.
2 Bought land and a building from Nelson. The fair market value of the land was $ 20,000; the building, $ 60,000. An outstanding mortgage on the property of $ 46,250 is held by Western Savings Bank. The corporation assumed responsibility for paying the mortgage. Nelson accepted 2,250 shares of common stock at par for her equity.
June 5 Paid an attorney $ 4,800 for reimbursement of state fees and for performing services related to incorporation.
7 Issued 150 shares of common stock to Baker for organizational services. The stock is selling at par.
July 7 Issued 675 shares of preferred 9 percent stock at $ 53 per share to investors for cash.
Aug. 3 Issued 425 shares of preferred 9 percent stock at $ 54 per share to investors for cash.

1. Record the transactions in general journal form on page 1.
2. Post the entries to the following accounts: Preferred 9 Percent Stock, Paid- in Capital in Excess of Par Value, and Common Stock.
3. Prepare the Stockholders’ Equity section of the balance sheet as of December 31, the end of the first year of operations. Net income for the year was $ 56,000, and no dividends were declared during the year. As a result, Retained Earnings has a credit balance of $ 56,000.

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  • CreatedOctober 21, 2014
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