Brianna and Britney are two sisters opening a clothing store with no other competition within the area. Both Brianna and Britney believe they will gain huge profits in the first year, providing them with the ability to sell franchises in the future. They can start the business as a partnership, however it is believed that cash flow will be an issue as they expand, thus they feel as though a corporate form of the business is best.   Assume one year later (2017) their company Bee’s Clothing is formed. Help them prepare the company’s journal entries and statement of owner’s equity based on the following information. The company’s charter authorizes 1,000,000 shares of common stock and 100,000 shares of preferred stock and the following are the transactions for consideration: Bee’s Clothing purchased a piece of land from the original owner.  In payment for the land, Bee’s issues 300,000 shares of common stock with $1.00 par value.  The land has been appraised at a market value of $1,200,000. The company sold 120,000 shares of common stock with $1 par value. Issued 25,500 shares of $20 par value preferred stock.  Shares were issued at par. Earned net income of $764,000. Dividend declared and paid - $0.15 per share on common stock. Dividend declared and paid - $5 per share on preferred stock.   Prepare the Journal entries and closing entries for the transaction. Prepare the owner’s equity section of the balance sheet based on the info.

Question

Brianna and Britney are two sisters opening a clothing store with no other competition within the area. Both Brianna and Britney believe they will gain huge profits in the first year, providing them with the ability to sell franchises in the future. They can start the business as a partnership, however it is believed that cash flow will be an issue as they expand, thus they feel as though a corporate form of the business is best.  

Assume one year later (2017) their company Bee’s Clothing is formed. Help them prepare the company’s journal entries and statement of owner’s equity based on the following information.

The company’s charter authorizes 1,000,000 shares of common stock and 100,000 shares of preferred stock and the following are the transactions for consideration:

  1. Bee’s Clothing purchased a piece of land from the original owner.  In payment for the land, Bee’s issues 300,000 shares of common stock with $1.00 par value.  The land has been appraised at a market value of $1,200,000.
  2. The company sold 120,000 shares of common stock with $1 par value.
  3. Issued 25,500 shares of $20 par value preferred stock.  Shares were issued at par.
  4. Earned net income of $764,000.
  5. Dividend declared and paid - $0.15 per share on common stock.
  6. Dividend declared and paid - $5 per share on preferred stock.

 

  1. Prepare the Journal entries and closing entries for the transaction.
  2. Prepare the owner’s equity section of the balance sheet based on the info. 

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