Highland Corporation was organized on January 1, 2021. It is authorized to issue 50,000, $3 noncumulative preferred shares, and an unlimited number of common shares. The following transactions were completed during the first year:

Jan. 10 Issued 100,000 common shares at $2 per share.

Mar. 1 Issued 10,000 preferred shares at $42 per share.

Mar. 31 Issued 75,000 common shares at $3 per share.

Apr. 3 Issued 25,000 common shares for land. The land’s appraised value was $74,000.

July 24 Issued 20,500 common shares for $60,000 cash and used equipment. The equipment originally cost $25,000. It now has a carrying amount of $15,000 and a fair value of $12,000.

Nov. 1 Issued 2,000 preferred shares at $48 per share.

Instructions

a. Journalize the transactions.

b. Open general ledger accounts and post to the shareholders’ equity accounts.

c. Determine the number of shares issued and the average per share amount for both common and preferred shares.

d. If the preferred shares were cumulative instead of noncumulative, would this have changed the amount investors were willing to pay for the shares? Explain.

Taking It Further

If Highland were a public corporation, how might that aff ect the journal entries recorded for the April 3 and July 24 issues of common shares?