Question

Wallings 12 - Saved L Review View Help Alternate Demo Problem Chapter 12 e Search Bonnie Enterprises Inc. received its approved articles of incorporation granting the right to issue an unlimited number common shares and 10,000 shares of $4, cumulative preferred shares. Selected transactions are presented below. Ken 2019 Feb. Mar 30 Exc.corporation ration's propres at si per Issued 45,000 common shares at $1 per share. Gave the corporation's promoters 30,000 common shares for their services in getting the corporation organized. The directors valued the services at $50,000. Exchanged 100,000 common shares for machinery with a fair value of $200,000. At the time of the acquisition, the shares were being traded for $2.35 per share. Closed the Income Summary account. A $25,000 loss was incurred. Dec. 2020 Jan. Dec. Issued 1,000 preferred shares at $75 per share. The board of directors declared a $4 dividend to preferred shares and $0.10 per share to outstanding common shares, payable on January 31 to the January 17 shareholders of record. Closed the Income Summary and Dividends accounts. A $69,000 net income was 2021 earned. Jan. 31 Paid the previously declared dividends. Required: 1. Prepare general journal entries to record the transactions. 2. Prepare the equity section of the balance sheet for December 31, 2020. sh

prepare genral entries

Answer 1

Debit Credit Date Particulars 2019 Feb 19th Bank Account To Common Stock (Shares) (Being 45000 shares issued @ $1 per share) 45000 45000 30000 30000 Feb 22nd Pre-incorporation Expenses Account To Common Stock (Shares) (Being 30000 shares issued to the promoters, against the services received in getting the corporation organised) 25000 25000 Dec 31st Reserve & Surplus Account To Statement of Profit & Loss Account (Income Summary Account) (Being loss transferred to Reserve & Surplus Account, shown under Shareholder's Funds) 75000 2020 Jan 12th Bank Account To Preferred Share Capital (Being 1000 shares issued @ $75) 75000 11500 Dec 15th Reserve & Surplus Account To Dividend Payable to Preferred Shareholders ($4 per share) To Dividend Payable to Common Shareholders ($0.1 per share) (Being 1000 shares issued @ $75) 4000 7500 L 69000 69000 Dec 31st Statement of Profit & Loss Account (Income Summary Account) To Reserve & Surplus Account (Being income earned transferred to Reserve & Surplus Account, shown under Shareholder's Funds) 2021 Jan 31st Dividend Payable to Preferred Shareholders ($4 per share) Dividend Payable to Common Shareholders ($0.1 per share) To Bank (Being 1000 shares issued @ $75) 4000 7500 11500 Equity Section - Balance Sheet for Dec 31, 2020 Particulars Amount Shareholder's Funds Share Capital Common Stock Preferred Stock 75000 75000 150000 Reserve & Surplus For the Year 2019 For the Year 2020 Dividend Payable -25000 69000 -11500 | 32500 182500 Total Equity (A+B) Assumptions: 1) Pre-incorpoartion Expenses are already adjusted in Net Profit given for the year 2019 Company didn't reversed back the proposed dividend entry. In case we assume reversal 2) of the same at the end of 2020, the reserve & surplus figure would be $ 44000, Total Equity would be $194000 in that case.