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

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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
   

*Net income $96,000 – Dividends $16,000 = $80,000




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