Reference no: EM132468178
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
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