Vaga Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Vaga Optics on December 31 of the current year as follows:
Preferred 2% Stock, $120 par (50,000 shares authorized, 25,000 shares issued) $ 3,000,000
Paid-In Capital in Excess of Par—Preferred Stock ........ 400,000
Common Stock, $75 par (500,000 shares authorized, 300,000 shares issued) . 22,500,000
Paid-In Capital in Excess of Par—Common Stock ......... 540,000
Retained Earnings ..................... 55,000,000

At the annual stockholders’ meeting on January 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $9,500,000. The plan provided
(a) That the corporation borrow $4,500,000,
(b) That 20,000 shares of the unissued preferred stock be issued through an underwriter, and
(c) That a building, valued at $1,200,000, and the land on which it is located, valued at $900,000, be acquired in accordance with preliminary negotiations by the issuance of 27,400 shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions:
Mar. 8. Borrowed $4,500,000 from Conrad National Bank, giving a 6% mortgage note.
13. Issued 20,000 shares of preferred stock, receiving $130 per share in cash.
26. Issued 27,400 shares of common stock in exchange for land and a building, according to the plan.
No other transactions occurred during March.

Illustrate the effects on the accounts and financial statements of each of the preceding transactions.

  • CreatedFebruary 04, 2014
  • Files Included
Post your question