Answer:
Feb 1
Dr Land $125,000
Cr Preferred Stock ($10 par) $20,000
Cr Paid-in Capital in Excess of Par value/preferred stock $105,000
Mar 1
Dr Cash $91,000
Cr Preferred Stock ($10 par)$13,000
Cr Paid-in Capital in Excess of Par/Preferred Stock $78,000
July 1
Dr Cash $112,000
Cr Common Stock ($5 par)80,000
Cr Paid-in Capital in Excess of Par/Common Stock $32,000
Sept 1
Dr Patent $28,000
Cr Preferred Stock ($10 par)$4,000
CrPaid-in Capital in Excess of Par/Preferred Cr Stock $24,000
Dec 1
Dr Cash $60,000
Cr Common Stock ($5 par) $40,000
Cr Paid-in Capital in Excess of Par/Common Stock $20,000
Dec 31
Dr Income Summary $260,000
Cr Retained Earnings $260,000
Explanation:
Preparation of the Journal entries and the closing entry for net income.
Feb 1
Dr Land $125,000
Cr Preferred Stock ($10 par) $20,000
($2,000*$10)
Cr Paid-in Capital in Excess of Par value/preferred stock $105,000
($125,000-$20,000)
(Issued 2,000 shares preferred stock for land, fair value $125,000)
Mar 1
Dr Cash $91,000
(1,300*$70)
Cr Preferred Stock ($10 par)$13,000
($10*1,300)
Cr Paid-in Capital in Excess of Par/Preferred Stock $78,000
($91,000-$13,000)
(Issued 1,300 shares preferred stock for cash, $70 per share)
July 1
Dr Cash $112,000
(16,000*$7)
Cr Common Stock ($5 par)80,000
(16,000*$5)
Cr Paid-in Capital in Excess of Par/Common Stock $32,000
($112,000-$80,000)
(Issued 16,000 shares common stock, $7 per share)
Sept 1
Dr Patent $28,000
(400*$70)
Cr Preferred Stock ($10 par)$4,000
($10*400)
CrPaid-in Capital in Excess of Par/Preferred Cr Stock $24,000
($28,000-$4,000)
(Issued 400 shares of preferred stock, trade for patent, unable to value)
Dec 1
Dr Cash $60,000
(8,000*$7.50)
Cr Common Stock ($5 par) $40,000
Cr Paid-in Capital in Excess of Par/Common Stock $20,000
($60,000-$40,000)
(Issued 8,000 shares common stock, $7.50 per share)
Dec 31
Dr Income Summary $260,000
Cr Retained Earnings $260,000
(Net income to retained earnings, closing income summary)
