The owners are desirous of comparing several financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020 and that Mulatto Company’s charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. Issued 100,000 shares of common stock. Stock has par value of 0.60 per share and was issued at $30 per share. Issued 14,000 shares of preferred stock at par value as payment in exchange for legal services. Exchanged 260,000 shares of common stock for land with an appraised value of $650,000 and a building with an appraised value of $500,000. Earned Net income $900,000. Paid dividends to preferred shareholders as well as $2 per share to common stockholders.Using the info above and as a guide:1. Prepare the journal entries with narrations to record the following:The issuances of stock.Close out net income to retained earnings.Dividend paid.Close out dividend to retained earnings. 2. Prepare Mulatto Company’s Stockholders equity section of the balance sheet at December 31, 2020.The following information must be clearly stated/shown:information on par values,the number of shares authorized and issued where necessary.the sub total for the total paid in capital.Retained earnings.total stockholders’ equity.

Mulatto Company Journal Entries Date Particulars Debit Credit 1 Cash $3,000,000…

Answered: he owners are desirous of comparing…

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter13: Corporations: Organization, Stock Transactions, And Dividends

Section: Chapter Questions

Problem 3PA: The following selected accounts appear in the ledger of EJ Construction Inc. at the beginning of the...

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The owners are desirous of comparing several financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020 and that Mulatto Company’s charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock.

Issued 100,000 shares of common stock. Stock has par value of 0.60 per share and was issued at $30 per share.

Issued 14,000 shares of preferred stock at par value as payment in exchange for legal services.

Exchanged 260,000 shares of common stock for land with an appraised value of $650,000 and a building with an appraised value of $500,000.

Earned Net income $900,000.

Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

Using the info above and as a guide:

1. Prepare the journal entries with narrations to record the following:

The issuances of stock.
Close out net income to retained earnings.
Dividend paid.
Close out dividend to retained earnings.

2. Prepare Mulatto Company’s Stockholders equity section of the balance sheet at December 31, 2020.

The following information must be clearly stated/shown:

information on par values,
the number of shares authorized and issued where necessary.
the sub total for the total paid in capital.
Retained earnings.
total stockholders’ equity.

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