Assignment:
Primary Company was organized on January 2, 2010. It was authorized to issue 300,000, no-par value common shares and 150,000 shares of $1.50 no-par value cumulative preferred. During 2010, 100,000 common and 50,000 preferred shares were issued, but no dividends were declared. The following account balances were extracted from the company's December 31 2010 year-end financial statements:
Common shares $ 1,000,000
Unearned revenue 70,000
Discount on bonds issued 5,000
Investment in Pretty Company 15,000
Organization Costs 7,000
Preferred shares 200,000
Retained earnings 175,000
Part A:
1. What was the net income for 2010?
Part B:
Prepare journal entries relating to the following transactions which occurred during 2011.
i) On January 2, the company issued 20,000 preferred shares in exchange for land acquired from Parisi Company. This land was carried on the books of Parisi Company at $80,000. The appraised value of the land was $105,000, but the president of Parisi feels it is worth at least $130,000.
ii) On February 3, Primary issued 50,000 common shares at $13.00 per share.
iii) On November 30, a 5% common stock dividend was declared and distributed. On this date the market price of the common shares was $16 per share.
iv) Cash dividends for the year were declared on December 30. For the common shareholders this amounted for $0.80 per share.
v) Net income for the year amounted to $550,000.
Part C:
Prepare a Statement of Shareholder's Equity at December 31, 2011 to reflect the information contained in Part A and Part B.