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Early in the year Amir and several friends organized a corporation called Malik, Inc. The corporation was authorized to issue 100,000 shares of $100 par value, 5 percent cumulative preferred stock and 100,000 shares of S1 par value common stock. The following transactions (among others) occurred during the year: Feb. 8 Issued for cash 40,000 shares of common stock at $10 per share. The shares were issued to Amir and four other investors. Feb. 13 Issued an additional 1,000 shares of common stock to Amir in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $12,000. Feb. 19 Issued 4,000 shares of preferred stock for cash of $400,000. Aug. 6 Acquired land as a building site in exchange for 10,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $12 per share. Oct. 26 The first annual dividend of $5 per share was declared on the preferred stock to be paid on December 11. Dec. 11 Paid the cash dividend declared on October 26. Dec. 31 After the revenue and expenses were closed into the Income Summary account, that amount indicated a net income of $810,000. Instructions a. Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account. b. Prepare the stockholders’ equity section of the Malik, Inc., balance sheet at December 31.

Early in the year Amir and several friends organized a corporation called Malik, Inc. The corporation was authorized to issue 100,000 shares of $100 par value, 5 percent cumulative preferred stock and 100,000 shares of S1 par value common stock. The following transactions (among others) occurred during the year: Feb. 8 Issued for cash 40,000 shares of common stock at $10 per share. The shares were issued to Amir and four other investors. Feb. 13 Issued an additional 1,000 shares of common stock to Amir in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $12,000. Feb. 19 Issued 4,000 shares of preferred stock for cash of $400,000. Aug. 6 Acquired land as a building site in exchange for 10,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $12 per share. Oct. 26 The first annual dividend of $5 per share was declared on the preferred stock to be paid on December 11. Dec. 11 Paid the cash dividend declared on October 26. Dec. 31 After the revenue and expenses were closed into the Income Summary account, that amount indicated a net income of $810,000. Instructions a. Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account. b. Prepare the stockholders’ equity section of the Malik, Inc., balance sheet at December 31.

FINANCIAL ACCOUNTING
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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Early in the year Amir and several friends organized a corporation called Malik, Inc. The corporation was authorized to issue 100,000 shares of $100 par value, 5 percent cumulative preferred stock and 100,000 shares of S1 par value common stock. The following transactions (among others) occurred during the year: Feb. 8 Issued for cash 40,000 shares of common stock at $10 per share. The shares were issued to Amir and four other investors. Feb. 13 Issued an additional 1,000 shares of common stock to Amir in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $12,000. Feb. 19 Issued 4,000 shares of preferred stock for cash of $400,000. Aug. 6 Acquired land as a building site in exchange for 10,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $12 per share. Oct. 26 The first annual dividend of $5 per share was declared on the preferred stock to be paid on December 11. Dec. 11 Paid the cash dividend declared on October 26. Dec. 31 After the revenue and expenses were closed into the Income Summary account, that amount indicated a net income of $810,000. Instructions a. Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account. b. Prepare the stockholders’ equity section of the Malik, Inc., balance sheet at December 31.
Transcribed Image Text:Early in the year Amir and several friends organized a corporation called Malik, Inc. The corporation was authorized to issue 100,000 shares of $100 par value, 5 percent cumulative preferred stock and 100,000 shares of S1 par value common stock. The following transactions (among others) occurred during the year: Feb. 8 Issued for cash 40,000 shares of common stock at $10 per share. The shares were issued to Amir and four other investors. Feb. 13 Issued an additional 1,000 shares of common stock to Amir in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $12,000. Feb. 19 Issued 4,000 shares of preferred stock for cash of $400,000. Aug. 6 Acquired land as a building site in exchange for 10,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $12 per share. Oct. 26 The first annual dividend of $5 per share was declared on the preferred stock to be paid on December 11. Dec. 11 Paid the cash dividend declared on October 26. Dec. 31 After the revenue and expenses were closed into the Income Summary account, that amount indicated a net income of $810,000. Instructions a. Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account. b. Prepare the stockholders’ equity section of the Malik, Inc., balance sheet at December 31.
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