Three people—Hill, Ramirez, and Campbell—organized A1 Rentals, Inc., with a charter providing for the following authorized capital:
a. 10,000 shares of preferred 9 percent stock, $ 40 par value
b. 65,000 shares of common stock, $ 8 par value
During its first year of operations, A1 Rentals, Inc., completed the following transactions that affected stockholders’ equity:
July 5 Issued to Hill 4,500 shares of common stock, at par, for cash.
6 Paid an attorney $ 4,250 for performing services related to incorporation as well as for reimbursement of state fees.
6 Bought equipment from Campbell for $ 27,880. Campbell accepted 3,485 shares of common stock in exchange for the equipment.
6 Bought land and a building from Ramirez. The fair market value of the land was $ 148,000; the building, $ 62,600. An outstanding mortgage on the property of $ 166,200 is held by Apple Savings Bank. The corporation assumed responsibility for paying the mortgage. Ramirez accepted 5,550 shares of common stock at par for his equity.
8 Issued 400 shares of common stock to Hill for organizational services. The stock is selling at par.
Aug. 5 Issued 475 shares of preferred 9 percent stock at $ 54 per share to investors for cash.
31 Issued 600 shares of preferred 9 percent stock at $ 53 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 $ 52,095, and no dividends were declared during the year. As a result, Retained Earnings has a credit balance of $ 52,095.