Reference no: EM132887473

Question

Scenario:

Matthew Mulatto and his brother John Mulatto plans to open a business. The major decision they face is how to organize the business. They expect to generate a massive profit during the first year. Although they have enough to start the business now as a partnership, they believe cash flow may be an issue as they grow. They believe that the corporate form of operation will be best option. They have hired you as a consultant and seek your advice.

· Issued 100,000 shares of common stock. Stock has par value of $0.60 per share and was issued at $30.00 per share.

· Issued 14,000 shares of preferred stock at par value as payment in exchange for legal services.

· Exchanged 260,000 shares of common stock for land with an appraised value of $ 650,000.00 and a building with an appraised value of $500,000.00.

· Earned Net income $900,000.00.

· Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

Using the info above and as a guide:

A. Prepare the journal entries with narrations to record the following:

· The issuances of stock.

· Close out net income to retained earnings.

· Dividend paid.

Close out dividend to retained earnings

Using the info above and as a guide:

A. Prepare the journal entries with narrations to record the following:

· The issuances of stock.

· Close out net income to retained earnings.

· Dividend paid.

· Close out dividend to retained earnings.

B. Prepare Mulatto Company's Stockholders equity section of the balance sheet at December 31, 2020. (Hint!!!!!!!) The following information must be clearly stated/shown:

· information on par values,

· the number of shares authorized and issued where necessary.

· the sub total for the total paid in capital.

· Retained earnings.

· total stockholders' equity.