Sheldon Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Sheldon Optics on October 31 of the current year as follows:
Preferred 2% Stock, $80 par (50,000 shares authorized,
25,000 shares issued)................. $ 2,000,000
Paid-In Capital in Excess of Par—Preferred Stock..... 75,000
Common Stock, $100 par (500,000 shares authorized,
50,000 shares issued)................ 5,000,000
Paid-In Capital in Excess of Par—Common Stock...... 600,000
Retained Earnings.................. 16,750,000
At the annual stockholders’ meeting on December 7, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $5,300,000. The plan provided (a) that the corporation borrow $2,000,000, (b) that 15,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that a building, valued at $1,850,000, and the land on which it is located, valued at $162,500, be acquired in accordance with preliminary negotiations by the issuance of 17,500 shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions:
Jan. 10. Borrowed $2,000,000 from Whitefish National Bank, giving a 7% mortgage note.
21. Issued 15,000 shares of preferred stock, receiving $84.50 per share in cash.
31. Issued 17,500 shares of common stock in exchange for land and a building, according to the plan.
No other transactions occurred during January.
Instructions
Illustrate the effects on the accounts and financial statements of each of the preceding transactions.