Vargas Corporation is authorized to issue 20,000 shares of $50 par value, 10% preferred stock and 125,000

Question:

Vargas Corporation is authorized to issue 20,000 shares of $50 par value, 10% preferred stock and 125,000 shares of $3 par value common stock. On January 1, 2010, the ledger contained the following stockholders’ equity balances.

Preferred Stock (10,000 shares) ......... $500,000

Paid-in Capital in Excess of Par Value-Preferred .... 75,000

Common Stock (70,000 shares) ........ 210,000

Paid-in Capital in Excess of Par Value-Common .. 700,000

Retained Earnings .............. 300,000

During 2010, the following transactions occurred.

Feb. 1 Issued 2,000 shares of preferred stock for land having a fair market value of $125,000.

Mar. 1 Issued 1,000 shares of preferred stock for cash at $65 per share.

July 1 Issued 16,000 shares of common stock for cash at $7 per share.

Sept. 1 Issued 400 shares of preferred stock for a patent. The asking price of the patent was $30,000. Market values were preferred stock $70 and patent indeterminable.

Dec. 1 Issued 8,000 shares of common stock for cash at $7.50 per share.

Dec. 31 Net income for the year was $260,000. No dividends were declared.

Instructions

(a) Journalize the transactions and the closing entry for net income.

(b) Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts. (Use J2 for the posting reference.)

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... 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... 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,...