Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice.Issued 100,000 shares of common stock. Stock has par value of $0.60 per share and was issued at $30.00 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 $650,000.00 and a building with an appraised value of $500,000.00.Earned Net income $900,000.00.Paid dividends to preferred shareholders as well as $2 per share to common stockholders. A. 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.

Equity shares and preference shares are two types of shares issued by the company. When stock or…

Answered: A. Prepare the journal entries with…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice.

Issued 100,000 shares of common stock. Stock has par value of $0.60 per share and was issued at $30.00 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 $650,000.00 and a building with an appraised value of $500,000.00.
Earned Net income $900,000.00.
Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

A. 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.

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