B. Prepare Mulatto Company’s Stockholders equity section of the balance sheet at December 31, 2020. The following information must be clearly stated/shown:information on par values,the number of shares authorized and issued where necessary.the sub total for the total paid in capital.Retained earnings.total stockholders’ equity. Part (A)Account title and ExplanationDebit($)Credit($)Cash [5,000 x $30]1,50,000aTo Common stock [5,000 x $0.01]50To Paid-in capital in excess of par1,49,950[To record issuance of common stock]Legal Services A/c DrTo Preferred Stock ( 5000*100)500000500000(To record issue of Preferred Stocks)Land A/cDr300000Building A/cTo Common Stock (120000* $0.01)Dr5000001200To Additional Paid in Capital798800[To record issuance of common stock]Income summary6,00,000Retained earnings6,00,000[To close net income]lePreferred Dividend25000То Cash25000Cash dividends [125,000 x $2]250000leТо Cash250000[To record payment of dividends]Retained earnings275000To Cash Dividends250000To Preferred Dividend25000(To Close dividend account) The owners are desirous of comparing serval financial transactions and possible outcomes toassist in guiding their decision-making process. They assume that the company will be formedon January 1, 2020 and that Mulatto Company's charter will authorize 1,000,000 shares ofcommon stock and 400,000, $100 par value, 5% cumulative preferred stock. Prepare thecompany's journal entries and statement of owner's equity based on the followinginformation:

Stockholders Equity Section includes Common Stock, Preferred Stock, Retained Earnings, Additional…

Answered: Account title and Explanation Debit($)…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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B. Prepare Mulatto Company’s Stockholders equity section of the balance sheet at December 31, 2020. The following information must be clearly stated/shown:

- information on par values,
- the number of shares authorized and issued where necessary.
- the sub total for the total paid in capital.
- Retained earnings.

total stockholders’ equity.

Part (A)
Account title and Explanation
Debit($)
Credit($)
Cash [5,000 x $30]
1,50,000
a
To Common stock [5,000 x $0.01]
50
To Paid-in capital in excess of par
1,49,950
[To record issuance of common stock]
Legal Services A/c Dr
To Preferred Stock ( 5000*100)
500000
500000
(To record issue of Preferred Stocks)
Land A/c
Dr
300000
Building A/c
To Common Stock (120000* $0.01)
Dr
500000
1200
To Additional Paid in Capital
798800
[To record issuance of common stock]
Income summary
6,00,000
Retained earnings
6,00,000
[To close net income]
le
Preferred Dividend
25000
То Cash
25000
Cash dividends [125,000 x $2]
250000
le
То Cash
250000
[To record payment of dividends]
Retained earnings
275000
To Cash Dividends
250000
To Preferred Dividend
25000
(To Close dividend account)

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, 2020 and that Mulatto Company's charter will authorize 1,000,000 shares of
common stock and 400,000, $100 par value, 5% cumulative preferred stock. Prepare the
company's journal entries and statement of owner's equity based on the following
information:

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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