Reference no: EM132467326

The current market values of the assets of both businesses are as follows.

Description                            Curtis' Coffee                    Cookie Creations

Cash                                     $ 7,500                              $12,000

Accounts receivable                    100                                      500

Merchandise inventory                  450                                  1,130

Equipment                                2,500                                 1,000

                                               $10,550                            $14,630

• Curtis and Natalie meet with a lawyer and form their corporation, called Cookie & Coffee Creations Inc., on November 1, 2018. The new corporation is authorized to issue 50,000 shares of $1 par common stock and 10,000 shares of no par, $6 cumulative preferred stock.

• The assets held by each business will be transferred into the corporation at current market value of $1 per share. Curtis will receive 10,550 common shares, and Natalie will receive 14,630 common shares in the corporation.

Question 1: Prepare the journal entries required on November 1, 2018, the date when Natalie and Curtis transfer the assets of their respective businesses into Cookie & Coffee Creations Inc.

Question 2: Assume that Cookie & Coffee Creations Inc. issues 1,000 $6 cumulative preferred shares to Curtis' Dad and the same number to Natalie's grandmother, in both cases for $5,000. Also assume that Cookie & Coffee Creations Inc. issues 750 common shares to its lawyer. Prepare the journal entries required for each of these transactions that also occurred on November 1.

Question 3: Prepare the opening balance sheet for Cookie & Coffee Creations Inc. as of November 1, 2018, including the journal entries in (1) and (2) above.