Question

P11-2A

Stockholders' Equity: Transactions and Balance Sheet Presentation Tunic Corporation was organized on April 1, with an authorization of 25,000 shares of six percent , $50 par value preferred stock and 200,000 shares of $5 par value common stock. During April, the following transactions affecting stockholders' equity occurred:

Apr 1 Issued 80,000 shares of common stock at $20 cash per share

3 Issued 2,000 shares of common stock to attorneys and promoters in exchange to their services in organizing the corporation. The services were valued at $31,000.

8 Issued 3,000 shares of common stock in exchange for equipment with a fair market value of $55,000

20 Issued 6,000 shares of preferred stock for cash at $60 per share

Required

a. Prepare journal entries to record the above transactions

b. Prepare teh stockholders' equity section of the balance sheet at April 30. Assume that the net income for April is $51,000.

Answer 1

Date	particulars	dr	cr
April 1	cash a/c ....	1600000
	To common stock a/c (80000*5)		400000
	To Securities Premium (80000*15)		1200000
	(Being stock issued for premium )
3	Goodwill a/c	31000
	To common stock(2000*5)		10000
	To Securities Premium (31000-2000*5)		21000
	(Being stock issued for services rendered by promoters)
8	Equipment a/c	55000
	To common stock(3000*5)		15000
	To Securities Premium (55000-3000*5)		40000
	Being stock issued for exchange of equipment.
20	Cash a/c...dr	360000
	To preferred stock(6000*50)		300000
	To Securities Premium (6000*10)		60000
	Being preferred stock of nominal value 50 issued

B)

Particulars	Amount
Common stock	425000
Reserves :
Securities Premium	1321000
Profit & Loss (51000-18000)	33000.

Total. 1779000

Note : preference dividend of 18000(300000*6%) has been deducted from Profit Loss to arrive reserves for equity.