Question

Question 2 After establishing their company's fiscal year-end to be October 31, Natalie and Curtis begin operating Cookie & Coffee Creations Inc. on November 1, 2020. On that date, after the issuance of shares, the paid-in capital section of the company's balance sheet is as follows. Paid-in capital Preferred stock, $0.50 noncumulative, no par value, 10,000 shares authorized, 2,000 issued Common stock, no par value, 100,000 shares authorized, 25,930 issued $10,000 25,930 Cookie & Coffee Creations then has the following selected transactions during its first year of operations. Dec. 1 Issues an additional 800 preferred shares to Natalie's brother for $4,000. Apr. 30 Declares a semiannual dividend to the preferred stockholders of record on May 15, payable on June 1. June 30 Repurchases 750 shares of common stock issued to the lawyer, for $500. Recall that these were originally issued for $750. The lawyer had decided to retire and wanted to liquidate all of her assets. Oct. 31 The company has had a very successful first year of operations. It earned revenues of $462,500 and incurred operating expenses of $370,000 (including $750 legal fee, but excluding income tax). 31 Records income tax expense. (The company has a 20% income tax rate.) 31 Declares a semiannual dividend to the preferred stockholders of record on November 15, payable on December 1.

Answer 1

From the desk of DATE Oct 31 $18500 $18500 Income Taxexpense Tak Payable (To record income tax expense). ($92500 20%)

Oct 31 Cash dividends $700. sividends Payable. $700 ( 2800 x $0.50 6/12) $1400 Druidend (Statement of Retairied eamingay Oddy

From the desk of DATE Stocke holdes equity Common stocle. Prefered stock Total capital stocle Retuined eaming. teru subtotal Treasely stocle Total stocke holder equity $25930 $14000 $39930 $72600 $112530 $ suo $112030 Oct3) Income Summary. $ 388500 Operating expense $370000 Income the capense $18500 Oct 31 Encome summary $74000 Retaried berlinge $74000