Question

Natalie and her friend Curtis Lesperance decide that they can benefit from joining Cookie Creations and Curtis's coffee shop. In this part of the problem, they want your help in preparing financial information following the first year of operations of their new business, Cookie & Coffee Creations. After establishing their company's fiscal year-end to be October 31, Natalie and Curtis begin operating Cookie & Coffee Creations Inc. on November 1, 2019. 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 shares issued Common stock, no par value, 100,000 shares authorized, 25,930 shares 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 expenses of $364,050 (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. Prepare the journal entries to record the above transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Record journal entries in the order displayed in the problem statement.) Date Account Titles and Explanation Debit Credit (To record income tax expense) (To record dividend declared) e Textbook and Media List of Accounts

Answer 1

	Date	Account Title and explanation	Debit ($)	Credit ($)
	Dec 1	Cash	4,000
		Preferred Stock		4,000
		(To record the issue of preferred stock to Natalia brother)
	Apr 30	Retained Earning	700
		Preferred dividend payable		700
		(To record the dividend declaration to preferred stock holders)
	June 1	Preferred dividend payable	1,400
		Cash		1,400
		(To record the payment of dividend to preferred stockholder's)
	June 30	Treasury Shares	500
		Cash		500
		(To record the purchase of own company' shares and recording as treasury shares)
	Oct 31	Income tax expenses	19,690
		Income tax payable		19,690
		(To record the income tax expenses @20% on the income)
		=462,500-364,050)*20%
	Oct 31	Income Statement or Profit or loss account	78,760
		Retained earning		78,760
		(To record the transfer of net income to retained earnings)
		==462,500-364,050-19,690
	Oct 31	Retained Earning	700
		Preferred dividend payable		700
		(To record the dividend declaration to preferred stock holders)