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Yakvenalex [24]
3 years ago
11

Santana Rey created Business Solutions on October 1,2015. The company has been successful, and Santana plans to expand her busin

ess. She believes that an additional $86,000 is needed and is investigating three funding sources.
(a) Santana's sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since Santana currently has about $129,000 invested in the business, Cicely's investment will mean that Santana will maintain about 60% ownership, and Cicely will have 40% ownership of Business Solutions.

(b) Santana's uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock. (c) Santana's banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years.

Required: Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a), (b), and (c).
Business
1 answer:
Alexus [3.1K]3 years ago
8 0

Answer:

option a)

Dr Cash 86,000

    Cr Common Stock 86,000

total common stock = $86,000 + $129,000 = $215,000

Santana owns $129,000 / $215,000 = 60% of common stock

Cicely owns $86,000 / $215,000 = 40% of common stock

option b)

Dr Cash 86,000

    Cr Preferred stocks ($100 par value, 7%) 86,000

option c)

Dr Cash 86,000

    Cr Notes payable, bank 86,000

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