Question

On January 2, 2011, Blueman Corporation was incorporated in the province of Ontario. It was authorized...

On January 2, 2011, Blueman Corporation was incorporated in the province of Ontario. It was authorized to issue an unlimited number of no-par value common shares, and 25,000 shares of no-par, $8, cumulative and non-participating preferred. During 2011, the firm completed the following transactions: Jan 8 Accepted subscriptions for 34,000 common shares at $12 per share. Down payment received on the subscribed shares was 50%. Jan 30 Issued 10,000 preferred shares in exchange for the following assets: machinery with a fair market value of $50,000, a factory with a fair market value of $200,000, and land with an appraised value of $120,000. Mar 15 Machinery with a fair market value of $85,000 was donated to the company. Apr 25 Collected the balance of the subscriptions receivable on only 30,000 shares and issued common shares. A customer defaulted on the last payment on a subscription for 4,000 shares. The company policy is to issue the proportion paid up to date for customers that default. June 30 Purchased 2,200 common shares at $18 per share. The shares were retired. Dec 31 Declared sufficient cash dividends to allow a $1 per share dividend for outstanding common shares. The dividend is payable on January 10, 2012, to shareholders of record on January 5, 2012. Dec 31 Closed the income summary to retained earnings. The income for the period was $225,000. Required:

( Prepare the journal entries to record the above transactions.

(Prepare the shareholders’ equity section of the balance sheet for Blueman Corporation at December 31, 2011.

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Answer #1
Blueman corporation
Journal entries
Date Debit Credit
Jan 8. Cash $        2,04,000
    Common stock $        2,04,000
Jan 30. Machinery $            50,000
Factory $        2,00,000
Land $        1,20,000
     Preferred stock $        3,70,000
Mar 15. Machinery $            85,000
    Donation $            85,000
Aprl 25 Cash $        1,80,000
    Common stock $        1,80,000
Jun 30. Common Stock $            26,400
Additional paid in-excess of capital $            13,200
   Cash $            39,600
Dec 31. Retained Earnings $            32,000
    Dividend payable $            32,000
Balance sheet (partly)
December 31, 2018
Assets $ Liabilities $
Cash 344400 Dividend payable 32000
Other assets (Balance figure) 140000
Property, plan & equipment Stockholder's Equity
    Machinery 135000 Preferred stock 370000
    Factory 200000 Common stock
    Land 120000     30,000 shares fully paid up 360000
      4,000 Partly paid 24000
less: Purchases 2200*12 26400
357600
Retained earnings 193000
less: additional paid-excess of capital(2200*6 (18-12)) 13200
Total stockholder's equity 907400
Total 939400 Total 939400

Workings:

i) Retained earnings = Income - dividend payable = $ 225,000-32,000 = 193,000

ii) Deficit in asset side is assumed as other assets

iii) Machinery = $ 50,000 + $ 85,000 (donated) = $ 135,000

iv) dividend payable = 30,000 (fully paid up shares) x $ 1 + 4000(50% paid up) * $ 1*50% = 32,000

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