Question

Matchlessly, Inc., was organized in 2017. At December 31, 2017, the company’s Balance sheet reported the following stockholders’ equity: Matchlessly, Inc. Stockholders’ Equity December 31,2017 Paid-in Capital Preferred stock, 7%, $40 par, 200,000 shares authorized, none issued $ 0 Common stock, $1 par, 600,000 shares authorized, 61,000 shares issued and outstanding 61,000 Paid-in capital in excess of par—common 41,000 Total paid-in capital 102,000 Retained earnings 29,000 Total Stockholders’ equity $131,000 Requirements: 1. During 2018, the company completed the following selected transactions and you are required to journalize each transaction. Explanations are not required. a. Issued for cash 1,300 shares of preferred stock at par value. b. Issued for cash 2,400 shares of common stock at a price of $5 per share. c. Net Loss for the year was $79,000, and the company declared no dividends. Make the closing entry for Net Loss. 2. Prepare the stockholders’ equity section of the Matchlessly Balance sheet as at December 31, 2018.

Answer 1

Solution. Part 1

Journal Entries for the year ended Dec. 31, 2018

Date	Account Tittle	Debit	Credit
2018
a	Cash	$52,000
	Paid in Capital, Pref. Stock		$52,000
	Issue at Par $40, 1,300 P.Stock for cash
b	Cash	12,000
	Paid in Capital, Common Stock		$2,400
	Paid in Capital, excess of par		$9,600
	Issue of 2,400 C.Stocks, $1 par, for  $5
c	Retained Earning	$29,000
	Paid in Capital, excess of par	$50,000
	Income Summary/Net Loss		$79,000
	Net Loss written of

Part 2:

Stockholder' Equity Section of Matchlessly' Balance Sheet, Dec. 31, 2018

Stockholders' Equity	Amount ($)	Amount ($)
A) Paid In Capital:
a) 200,000 shares authorized:1,300 P. Stock issued, $40 par	$52,000
b) 600,000 shares authorized:63,400 C. Stock issued and outstanding, $1 par ($61,000 +$2,400)	$63,400	$115,400
B) Paid in Capital, excess of par:
Pref. Stock	---------
Common Stock ($41,000+ $9,600)	$50,600
C) Retained Earning	$29,000
D) Less Net Loss written of	($79,00)	$600
Stockholders' Equity		$116,000