Question

Question 8

Settlers of Catan Co is authorized to issue an unlimited number of common shares and 10,000 preferred shares. During its first year, the business completed the following share issuance transactions:

•     July 19: Issued 10,000 common shares for cash of $6.50 per share.
•     Oct 3: Issued 500, $1.50 preferred shares for $50,000 cash.
•     Oct 11: Received inventory valued at $11,000 and equipment with fair value of $8,500 for 3,300

common shares.

1.    Journalize the transactions. Explanations are not required.
2.    Prepare the shareholders’ equity section of Settlers of Catan Co’s balance sheet. The ending

balance of Retained Earnings is a deficit of $42,000.

Answer 1

Answer Credit Date July, 19 Debit $65,000 Account Titles and Explanation Cash (10,000 shares x $6.50 per share) Common Stock (To record the issue of common shares) $65,000 Oct, 3 $50,000 Cash Preferred Stock (To record the issue of preferred shares) $50,000 Oct, 11 $11,000 $8,500 Inventory Equipment Common Stock (To record the common shares against inventory and Equipment) $19,500 Settlers of Catan Co Balance Sheet (Partial) Stockholder's Equity Paid-in Capital: Common ock ($65,000+ $19,500) Preferred Stock $84,500 $50,000 Total Paid-in Capital Retained Earnings Total Stockholder's Equity $1,34,500 ($42,000) $92,500