Question

Prince Dell, Inc., was organized in 2016. At December 31, 2016, the Prince Dell

balance sheet reported the following stockholders’ equity:

Prince Dell Inc. Stockholders’ Equity December 31,2016
Paid-in Captital
Preferred stock, 4%, $55 par, 650,000 shares authorized, none issued	$            0
Common stock, $2 par, 540,000 shares authorized, 62,000 shares issued and outstanding	124,000
Paid-in capital in excess of par—common	42,000
Total paid-in capital	166,000
Retained earnings	28,000
Total Stockholders’ equity	$194,000

Requirements:

1. During 2017, the company completed the following selected transactions.

Journalize each transaction. Explanations are not required.

a. Issued for cash 1,500 shares of preferred stock at par value.

b. Issued for cash 2,000 shares of common stock at a price of $7 per share.

c. Net income for the year was $78,000, and the company declared no dividends.

Make the closing entry for net income.

2. Prepare the stockholders’ equity section of the Prince Dell balance sheet at

December 31, 2017.

Answer 1

Date	Accounting titles & Explanations					Debit	Credit
a)	Cash					82500
	Preferred Stock		(1500*55)				82,500
b)	Cash					14,000
	Common Stock		(2000*2)				4000
	paid in Capital in excess of par						10000
c)	income summary					78,000
	Retained earnings						78,000
	Prince Dell inc
	Stockholder's Equity
	paid in capital
	preferred stock ,4%,$55par,650,000shares
	authorized ,1500 issued						82,500
	Common stock,$2 par,540,000 shares authorized ,64,000
	shares issued and outstanding						128000
	paid in capital in excess of par-common						52000
	total paid in capital						262,500
	Retained earnings						106000
	total Stockholder's Equity						262,500