C-Cell Wireless needed additional capital to expand, so the business incorporated

C-Cell Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes C-Cell to issue 50,000 shares of 7%, $50 par value cumulative preferred stock and 120,000 shares of $2 par value common stock. During the first month, C-Cell completed the following transactions:

Oct. 2 Issued 22,000 shares of common stock for a building with a market value of $120,000.

6 Issued 900 shares of preferred stock for $70 per share.

9 Issued 12,000 shares of common stock for cash of $60,000.

10 Declared a $16,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock.

25 Paid the cash dividend.

Requirements

1. Record the transactions in the general journal.

2. Prepare the stockholders’ equity section of C-CelPs balance sheet at October 31, 2016. Assume C-Cell’s net income for the month was $96,000.

SOLUTION

Requirement 1

Date	Accounts and Explanation	Debit	Credit

Oct. 2	Building	120,000
	Common Stock—$2 Par Value($2 per share × 22,000 shares)		44,000
	Paid-In Capital in Excess of Par—Common ($120,000– $44,000)		76,000
	Issued common stock for building

6	Cash ($70 per share × 900 shares)	63,000
	Preferred Stock—$50 Par Value($50 per share × 900 shares)		45,000
	Paid-In Capital in Excess of Par—Preferred ($63,000 − $45,000)		18,000
	Issued preferred stock for cash

9	Cash	60,000
	Common Stock—$2 Par Value($2 per share × 12,000 shares)		24,000
	Paid-In Capital in Excess of Par—Common ($60,000 – $24,000)		36,000
	Issued common stock for cash

10	Cash Dividends	16,000
	Dividends Payable—Preferred		3,150
	Dividends Payable—Common		12,850
	Declared cash dividend.*

25	Dividends Payable—Preferred	3,150
	Dividends Payable—Common	12,850
	Cash		16,000
	Paid cash dividend.

*Total Dividend			$16,000
Dividend to Preferred Stockholders	7% × $50 ×900 shares	$ 3,150
Current Year Dividend			(3,150)
Dividend to Common Stockholders			$12,850

Requirement 2

Paid-In Capital:
Cumulative Preferred Stock—7%, $50 Par Value; 50,000 shares authorized, 900 shares issued and outstanding	$ 45,000
Paid-In Capital in Excess of Par—Preferred	18,000
Common Stock—$2 Par Value; 120,000 shares authorized, 34,000 shares issued and outstanding	68,000
Paid-In Capital in Excess of Par—Common	112,000
Total Paid-In Capital	243,000
Retained Earnings*	80,000
Total Stockholders’ Equity	$ 323,000