Reference no: EM131132511

Vargas Corporation is authorized to issue 20,000 shares of $50 par value, 10% preferred stock and 125,000 shares of $3 par value common stock. On January 1, 2010, the ledger contained the following stockholders' equity balances.

Preferred Stock (10,000 shares) ......... $500,000
Paid-in Capital in Excess of Par Value-Preferred .... 75,000
Common Stock (70,000 shares) ........ 210,000
Paid-in Capital in Excess of Par Value-Common .. 700,000
Retained Earnings .............. 300,000

During 2010, the following transactions occurred.

Feb. 1 Issued 2,000 shares of preferred stock for land having a fair market value of $125,000.
Mar. 1 Issued 1,000 shares of preferred stock for cash at $65 per share.
July 1 Issued 16,000 shares of common stock for cash at $7 per share.
Sept. 1 Issued 400 shares of preferred stock for a patent. The asking price of the patent was $30,000. Market values were preferred stock $70 and patent indeterminable.
Dec. 1 Issued 8,000 shares of common stock for cash at $7.50 per share.
Dec. 31 Net income for the year was $260,000. No dividends were declared.

Instructions

(a) Journalize the transactions and the closing entry for net income.

(b) Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use J2 for the posting reference.)

(c) Prepare a stockholders' equity section at December 31, 2010.