Early in the year Bill Barnes and several friends organized

Early in the year Bill Barnes and several friends organized a corporation called Barnes Communications, Inc. The corporation was authorized to issue 50,000 shares of $100 par value, 10 percent cumulative preferred stock and 400,000 shares of $2 par value common stock.

The following transactions (among others) occurred during the year:


Jan. 6 Issued for cash 20,000 shares of common stock at $14 per share.

The shares were issued to Barnes and 10 other investors.


Jan. 7 Issued an additional 500 shares of common stock to Barnes in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $7,000.


Jan. 12 Issued 2,500 shares of preferred stock for cash of $250,000.


June 4 Acquired land as a building site in exchange for 15,000 shares of common stock.

In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $15 per share.


Nov. 15 The first annual dividend of $10 per share was declared on the preferred stock to be paid December 20.


Dec. 20 Paid the cash dividend declared on November 15.

Dec. 31 After the revenue and expenses were closed into the Income Summary account, that account indicated a net income of $147,200.


Instructions

a. Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account.

b. Prepare the stockholders' equity section of the Barnes Communications, Inc., balance sheet at December 31.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...