Instructions
Problem 1. The student is referred to Volume I, pages 458-459, where a similar problem is illustrated.
Problem 2. See Volume I, pages 285-286.
II
Problems
1. The Ibex Manufacturing Co. is incorporated with an authorized capital stock of $500,000 common and $250,000 6% preferred; $150,000 of the preferred is subscribed for and paid in full. One-half of the common is subscribed for and 50% paid in, the balance to be paid in five monthly instalments. The remaining preferred stock is later subscribed for at 101 and 50% paid, and half of the remaining common is subscribed for at 90 and paid in full. After operating for six months the remaining common is sold at 102 to provide funds for enlargement, one-half paid in cash and the balance in one month. Balance of preferred subscriptions are paid in cash. Show all the above transactions by means of journal entries.
2. At the close of the first year, the Ibex Manufacturing Co., being short of ready funds and not desiring to extend its credit further, secures from its stockholders a donation of $50,000 common and $10,000 preferred, one-half of which is immediately sold at 90 and 101 respectively. At the end of the second year the remainder of the donated stock was disbursed to the stockholders as a dividend, net profits for the year amounting to $45,000. Journalize all the above transactions, showing ultimate disposition of the working capital.
3. The Smith Brooks Publishing Co. has a capital stock of $750,000, of which one-third is 6% cumulative preferred stock. The company has a surplus of $65,000. It has an outstanding bond issue of $200,000 at 4½% interest. The profits for the year are $61,392.75. No profits have been distributed for three years. The directors pay the bond interest, declare a 3% dividend on common, and carry $7,500 to the sinking fund. Bring all of the above onto your books.
4. A corporation has been formed with an authorized capital stock of $200,000, one-fourth of which is 7% cumulative preferred. The entire issue of preferred is subscribed for at par and 50% paid in. When the balance is paid, one share of common is to be given as a bonus with every five shares of preferred. The promoter of the company is given $15,000 in common for his services. The company paid cash $250 for a set of stock records; $25 for corporate seal; $500 for lawyer’s fees in incorporating; $250 for state charter, and $375 for sundry expenses in organizing. $75,000 of the common stock has been subscribed for at par to be paid in five monthly instalments. The balance has been paid on the preferred stock and three instalments on the common. Make journal entries covering the above transactions.
Instructions