Question

Matchlessly, Inc., was organized in 2017. At December 31, 2017, the company’s Balance sheet reported the following stockholders’ equity:

  Matchlessly, Inc. Stockholders’ Equity December 31,2017

Paid-in Capital
Preferred stock, 7%, $40 par, 200,000 shares authorized, none issued	$0
Common stock, $1 par, 600,000 shares authorized, 61,000 shares issued and outstanding	61,000
Paid-in capital in excess of par—common	41,000
Total paid-in capital	102,000
Retained earnings	29,000
Total Stockholders’ equity	131,000

Requirements: 1. During 2018, the company completed the following selected transactions and you are required to journalize each transaction. Explanations are not required.

a. Issued for cash 1,300 shares of preferred stock at par value.

b. Issued for cash 2,400 shares of common stock at a price of $5 per share.

c. Net Loss for the year was $79,000, and the company declared no dividends. Make the closing entry for Net Loss.

2. Prepare the stockholders’ equity section of the Matchlessly Balance sheet as at December 31, 2018.

Answer 1

Answer to 1a
Particulars	Dr	Cr
Bank A/c	$                 52,000
Preference Share Capital		$       52,000
Answer to 1b
Particulars	Dr	Cr
Bank A/c	$                 12,000
Common Stock		$         2,400
Paid-in Capital in Excess of Par		$         9,600
Answer to 1c
Particulars	Dr	Cr
Retained Earnings A/c	$                 79,000
Profit & Loss A/c		$       79,000
Answer to 2
Matchlessly, Inc. Stockholders’ Equity December 31,2018
Paid-in Capital	Closing Balance
Preferred stock, 7%, $40 par, 200,000 shares authorized, 1300 shares issued and outstanding	$                 52,000
Common stock, $1 par, 600,000 shares authorized, 63,400 shares issued and outstanding	$                 63,400
Paid-in capital in excess of par—common	$                 50,600
Total paid-in capital	$               166,000
Retained earnings	$               (50,000)
Total Stockholders’ equity	$               116,000
For Calculation Purpose Only
Paid-in Capital	Opening Balance	Transactions	Closing Balance
Preference Stock	$                          -	$       52,000	$              52,000
Common Stock	$                 61,000	$         2,400	$              63,400
Paid-in capital in excess of par—common	$                 41,000	$         9,600	$              50,600
Total paid-in capital	$               102,000	$       64,000	$            166,000
Retained earnings	$                 29,000	$     (79,000)	$             (50,000)
Total Stockholders’ equity	$               131,000	$     (15,000)	$            116,000