The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2021. In addition, J&K Paint Shop Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information. a. Issued 40% shares of class A common stock. Stock has par value of $45 per share and was issued at $62 per share. b. Issued 40% shares of no-par class B stock. (Issue price is at $60.00) C. Issued 30% shares of preferred stock at par value (Par value - $125). d. Exchanged 40% shares of class A common stock for Office Furniture and Equipment with an appraised value of $4,000,000 and Motor Truck with an appraised value of $10,000,000. e. Earned Net income $2,000,000. f. Declared interim dividends for preferred shareholders as well as $.80 per share to common stockholders. Using the info above and as a guide: Prepare the journal entries with narrations to record the following: The issuances of stock. Close out net income to retained earnings. Dividend declared. Close out dividend to retained earnings. Prepare the company’s Stockholders equity section of the balance sheet at December 31, 2021. (Hint!!!!!!!) The following information must be clearly stated/shown: information on par or par values for all classes of shares which must be shown separately. the number of shares authorized and issued where necessary. the sub total for the total paid in capital. Retained earnings. total stockholders’ equity.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter13: Corporations: Earning & Profits And Distributions

Section: Chapter Questions

Problem 29P

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The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2021. In addition, J&K Paint Shop Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information.

a. Issued 40% shares of class A common stock. Stock has par value of $45 per share and was issued at $62 per share.

b. Issued 40% shares of no-par class B stock. (Issue price is at $60.00)

C. Issued 30% shares of preferred stock at par value (Par value - $125).

d. Exchanged 40% shares of class A common stock for Office Furniture and Equipment with an appraised value of $4,000,000 and Motor Truck with an appraised value of $10,000,000.

e. Earned Net income $2,000,000.

f. Declared interim dividends for preferred shareholders as well as $.80 per share to common stockholders.

Using the info above and as a guide:

Prepare the journal entries with narrations to record the following:

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

Prepare the company’s Stockholders equity section of the balance sheet at December 31, 2021. (Hint!!!!!!!) The following information must be clearly stated/shown:
- information on par or par values for all classes of shares which must be shown separately.
- 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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