Earth Star Diamonds Inc. began a potentially lucrative mining operation on October 1, 2020. It is authorized to issue 100,000 shares of $0.60 cumulative preferred shares and 500,000 common shares.

Part A

Required

Prepare journal entries for each of the transactions listed.

Part B

Required

Based on the transactions in Part A, prepare the balance sheet as at October 31, 2020.

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Issued for cash, 1,000 shares of the preferred shares at $4.80 each. 10 Issued for cash, 50,000 shares of the common stock at $3.60 per share. 15 Earth Star purchased land for $186,000, paying cash of $66,000 and borrowing the balance from the bank (to be repaid in two years). Oct. 15,000 preferred shares were issued today for total cash proceeds of $84,600. 20 In addition to the declaration of the annual dividend on the preferred shares, dividends of $26,880 were declared on the common shares today, payable November 15, 2020. 31 24 Revenues of $900,000 were earned during the month; all cash. Expenses, all cash, totalling $300,000 were incurred in October. Close the Income Summary and dividend accounts.