The partnership of Nuan Zhang and Jen Phuah needed additional capital to expand into new markets, so the business incorporated as A-1 Services Inc. The articles of incorporation under the Canada Business Corporations Act authorize A-1 Services Inc. to issue 500,000 $2.50 preferred shares and 2,000,000 common shares. In its first year, A-1 Services Inc. completed the following share-related transactions:
2014 Aug. 2 Paid incorporation fees of $6,000 and paid legal fees of $16,000 to organize as a corporation.
2 Issued 20,000 common shares to Zhang and 25,000 common shares to Phuah in return for cash. Zhang paid $150,000 cash, and Phuah paid $187,500 cash.
Dec. 10 Issued 1,000 preferred shares to acquire a computer system with a market value of $80,000.
16 Issued 15,000 common shares for cash of $120,000.
Required
1. Record the transactions in the general journal.
2. Prepare the shareholders' equity section of the A-1 Services Inc. balance sheet at
December 31, 2014. The ending balance in Retained Earnings is $130,000.