Question

On January 2, 2011, Blueman Corporation was incorporated in the province of Ontario. It was authorized to issue an unlimited number of no-par value common shares, and 25,000 shares of no-par, $8, cumulative and non-participating preferred. During 2011, the firm completed the following transactions: Jan 8 Accepted subscriptions for 34,000 common shares at $12 per share. Down payment received on the subscribed shares was 50%. Jan 30 Issued 10,000 preferred shares in exchange for the following assets: machinery with a fair market value of $50,000, a factory with a fair market value of $200,000, and land with an appraised value of $120,000. Mar 15 Machinery with a fair market value of $85,000 was donated to the company. Apr 25 Collected the balance of the subscriptions receivable on only 30,000 shares and issued common shares. A customer defaulted on the last payment on a subscription for 4,000 shares. The company policy is to issue the proportion paid up to date for customers that default. June 30 Purchased 2,200 common shares at $18 per share. The shares were retired. Dec 31 Declared sufficient cash dividends to allow a $1 per share dividend for outstanding common shares. The dividend is payable on January 10, 2012, to shareholders of record on January 5, 2012. Dec 31 Closed the income summary to retained earnings. The income for the period was $225,000. Required:

( Prepare the journal entries to record the above transactions.

(Prepare the shareholders’ equity section of the balance sheet for Blueman Corporation at December 31, 2011.

Answer 1

SOLUTION:-

Blueman corporation
Journal entries
Date		Debit	Credit
Jan-8	Cash	$ 2,04,000
	Common stock		$ 2,04,000
Jan-30.	Machinery	$ 50,000
	Factory	$ 2,00,000
	Land	$ 1,20,000
	Preferred stock		$ 3,70,000
Mar-15	Machinery	$ 85,000
	Donation		$ 85,000
April-25	Cash	$ 1,80,000
	Common stock		$ 1,80,000
Jun-30	Common Stock	$ 26,400
	Additional paid in - excess of capital	$ 13,200
	Cash		$ 39,600
Dec-31	Retained Earnings	$ 32,000
	Dividend payable		$ 32,000

Balance sheet (partly)
December 31,2018
Assets	$	Liabilities	$
Cash	344400	Dividend	32000
Other assets (Balance figure)	140000
Property, plan & equipment		Stockholder's Equity
Machinery	135000	Preferred stock	370000
Factory	200000	Common stock
Land	120000	30,000 shares fully paid up	360000
		4,000 Partly paid	24000
		less: Purchases 2200*12	26400
			357600
		Retained earnings	193000
		less: additional paid-excess of capital (2200*6(18-1))	13200
		Total stockholder's equity	907400
Total	939400	Total	939400

Workings:

i) Retained earnings = Income - dividend payable = $225,000-32,000 = 193,000

ii) Deficit in assets side is assumed as other assets

iii) Machinery = $ 50,000+$ 85,000 (donated) = $ 135,000

iv) dividend payable = 30,000 (fully paid up shares) x 1 +4000(50% paid up ) * $ 1*50% = 32,000

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