Question

CHAPTER 13 PROBLEMS: SET B Maddie mcheon P13-1B Mendoza Corporation was organized on January 1, 2017. It is authorized to issue 20,000 shares of 6%, $40 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year. Jan. 10 Issued 100.000 shares of common stock for cash at $3 per share. Mar. 1 Issued 10,000 shares of preferred stock for cash at $55 per share. Apr. 1 Issued 25,000 shares of common stock for land. The asking price of the land was $90,000. The company's estimate of fair value of the land was $75,000. May 1 Issued 75,000 shares of common stock for cash at $4 per share. Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill for $50,000 for services performed in helping the company organize. Sept. I Issued 5.000 shares of common stock for cash at $6 per share. Nov. I Issued 2,000 shares of preferred stock for cash at $60 per share. Trastructions (a) Journalize the transactions (b) Post to the stockholders' equity accounts. (Use Jl as the posting reference.) (c) Prepare the paid-in capital section of stockholders' equity at December 31, 2017. P13-2B Hawthorne Corporation had the following stockholders' equity accounts on January 1, 2017: Common Stock ($1 par) $400,000, Paid in Capital in Excess of Par Common Stock $500,000, and Retained Earnings $100.000. In 2017, the company had the following treasury stock transactions. Mari Purchased 5,000 shares at $7 per share. June | Sold 1,000 shares at $10 per share. Sept. Sold 2.000 shares at $9 per share. Dec. 1 Sold 1,000 shares at $5 per share. Hawthorne Corporation uses the cost method of accounting for treasury stock. In 2017 the company reported net income of $80,000. Instructions (a) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2017, for net income. (b) Open accounts for (1) Paid-in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earnings. Post to these accounts using J12 as the posting reference. (c) Prepare the stockholders' equity section for Hawthorne Corporation at December 31, 2017.

Answer 1

Journal Entries in the books of Mendoza Corporation

Note: Par value of equity shares is $2 and all other entries has been passed considering it

Jan10. Bank. A/c. Dr. 300,000

To Equity Share Capital.(200,000×2) 200,000

To Securities Premium Reserve. 100,000

(Being 100,000 equity shares issued at $3 each )

March1. Bank A/c. Dr. 550,000

To 6% Preference share capital. 400,000

To Securities Premium Reserve. 150,000

(Being 10,000 6% preference shares issued)

April1. Land A/c. Dr. 75,000

To Equity Share capital. 50,000

To Securities premium reserve. 25000

(Being 25000 equity shares issued for purchase of land)

Note: Here we will record the land at the present fair value of land that has been estimated by the company and price of share will be also recorded at that value.

May1 Cash A/c. Dr. 300,000

To Equity share capital. 150,000

To Securities premium reserve. 150,000

(Being 75000 equity shares issued)

Aug1. Preliminary Expenses A/c. Dr. 50000

To Equity share capital A/c. 10000

To securities premium reserve. 40000

(Being shared issued to attorney for thier services)

Sept1. Cash. A/c. Dr.    30000

To Equity Share capital a/c 10000

To Securities premium reserve. 20000

(Being 5000 equity shares issued)

Nov1. Cash A/c. Dr. 120,000

To 6% Preference share capital. 80000

To Securities premium reserve. 40000

(Being 2000 6% preference shares issued)