Assignment ID: FG133136717
a) The partnership of Nuan Cheung and Jen Sung needed additional capital to expand into new? markets, so the business incorporated as King Services Inc. The articles of incorporation under the Canada Business Corporations Act authorize King Services Inc. to issue 1,000,000 ?$4.75 preferred shares and 3,200,000 common shares. In its first? year, King Services Inc. completed the following ? share-related transactions:
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Aug. 2 Paid incorporation fees of ?$8,500 and paid legal fees of ?$16,500 to organize as a corporation.
Aug. 2 Issued 26,000 common shares to Cheung and 31,000 commons shares to Sung in return for cash. Cheung paid $195,000 ?cash, and Sung paid $232,500 cash.
Dec. 10 Issued 2,000 preferred shares to acquire a computer system with a market value of $164,000.
Dec. 16 Issued 16,000 common shares for cash of $272,000.
1. Record the transactions in the general journal.
2. Prepare the? shareholders’ equity section of the King Services Inc. balance sheet at December? 31, 2020. The ending balance in Retained Earnings is $200,000.
b) Randolph Inc. was organized in 2019. At December? 31, 2019?, Randolph ?Inc.’s balance sheet reported the following? shareholders’ equity account? information:
Preferred shares, $5.75, 50,000 shares authorized, none issued $0
Common shares, 1,100,000 shares authorized, 11,000 shares issued and outstanding 16,500
Retained earnings (Deficit) -60,000
Answer the following questions and make journal entries as needed:
1. What does the $5.75 mean for preferred shares? If Randolph Inc. issues 3,900 preferred shares, how much in cash dividends will it expect to pay?
2. At what average price per share did Randolph Inc. issue the common shares during 2019?
3. Were first-year operations profitable? Give your reason.
4. Journalize the share transactions which took place during 2020. Explanations are not required.
Feb. 15 Issued for cash 1,900 preferred shares at $21.00 per share.
April 2 Issued for cash 5,000 common shares at a price of $3.00 per share.
June 1 Issued 160,000 common shares to acquire a building valued at $350,000.
Dec. 31 Net income for the year was $180,000, and the company declared no dividends. Make the closing entry for net income.
5. Prepare the shareholders’ equity section of the Randolph Inc. balance sheet at December 31, 2020.