Question

Issuing shares and preparing the shareholders' equity section of the balance sheet Problem 13-3A Riverbend Inc. was organized in 2016. At December 31, 2016, Riverbend Inc.'s balance sheet reported the following shareholders' equity: Preferred shares, $4.00, 200,000 shares authorized, none issued $ 0 Common shares, 1,000,000 shares authorized, 150,000 shares issued and outstanding 225,000 Retained earnings (Deficit) (50,000) Total shareholders' equity $175,000 5. Total shareholders' equity, 5613,750 768 Part 3 Accounting for Partnerships and Corporate Transactions

Answer 1

1.$4.00 indicates the annual dividend payable per share of preferred stock.

Amount of dividends to be paid if 2500 preferred shares are issued = 2500*$4=>$10,000.

2.average price per share of common stock = $225,000 / 150,000 issued and outstanding

=>$1.50.

3.First year operations were not profitable.

Reason: Retained earnings are negative.

The first year of operations resulted in a loss of $50,000.

4.Required journal entries:

sno	general journal	debit	credit
a	cash a/c	30,000
	...............To Preferred stock a/c		30,000
	(1500*$20)
b	cash a/c	8,750
	...........To common stock a/c		8,750
	(5000*$1.75)
c	building a/c	250,000
	............To common stock a/c		250,000
d	Income summary a/c	150,000
	..............To retained earnings		150,000

5.Riverbend Inc

Shareholder's equity for the year ended December 31 2017.

Preferred shares $4.00..200,000 shares authorized, 1500 issued and outstanding	30,000
common shares 1,000,000 shares authorized, 255,000 issued and outstanding (225,000+8750+250000)	483,750
Retained earnings ((50,000) + 150,000)	100,000
total stockholder's equity	613,750