Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. The owners are desirous of comparing several 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. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. Please prepare the company’s journal entries and statement of owner’s equity based on the following information: Issued 20% shares of Class A common stock. Stock has par value of $30.00 per share and was issued at $40. Issued 20% shares of no-par Class B stock at $38.00. Issued 40% shares of preferred stock at par value $110.00. Exchanged 40% shares of Class A common stock for Office Furniture and Equipment with appraised value of $4,000,000.00 and Motor Truck with an appraised value of $10, 000,000. Earned Net Income $$1,800,000.00. Declared Interim dividends for prepared shareholders as well as $0.80 per share to common stockholders. Using the info above and as a guide: Prepare the journal entries with narrations to record the following: The issuances of stock. Close out net income to retained earnings. Dividend declared. Close out dividend to retained earnings. Prepare the company’s Stockholders equity section of the balance sheet at December 31, 2020. The following information must be clearly stated/shown: information on par or par values for all classes of shares which must be shown separately the number of shares authorized and issued where necessary. the sub total for the total paid in capital. Retained earnings. total stockholders’ equity.
Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership,
The owners are desirous of comparing several 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. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative
- Issued 20% shares of Class A common stock. Stock has par value of $30.00 per share and was issued at $40.
- Issued 20% shares of no-par Class B stock at $38.00.
- Issued 40% shares of preferred stock at par value $110.00.
- Exchanged 40% shares of Class A common stock for Office Furniture and Equipment with appraised value of $4,000,000.00 and Motor Truck with an appraised value of $10, 000,000.
- Earned Net Income $$1,800,000.00.
- Declared Interim dividends for prepared shareholders as well as $0.80 per share to common stockholders.
Using the info above and as a guide:
- Prepare the journal entries with narrations to record the following:
- The issuances of stock.
- Close out net income to
retained earnings . - Dividend declared.
- Close out dividend to retained earnings.
- Prepare the company’s
Stockholders equity section of thebalance sheet at December 31, 2020. The following information must be clearly stated/shown:
- information on par or par values for all classes of shares which must be shown separately
- the number of shares authorized and issued where necessary.
- the sub total for the total paid in capital.
- Retained earnings.
- total stockholders’ equity.
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 3 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![College Accounting, Chapters 1-27 (New in Account…](https://www.bartleby.com/isbn_cover_images/9781305666160/9781305666160_smallCoverImage.gif)
![College Accounting, Chapters 1-27 (New in Account…](https://www.bartleby.com/isbn_cover_images/9781305666160/9781305666160_smallCoverImage.gif)