B&L Landscapes, Inc. Mini Practice Part 1

Bill Graham started his career mowing lawns for neighbors while he was in junior high school. Bill worked summers for the local golf course while he was in high school and after he graduated, he started his own lawn care business, Bills Lawn Care. In addition to lawn care, he also sells two types of fertilizer. Bill is ready to expand his business and wants to add sprinkler systems to his product offering. Larry Miller has an established sprinkler system business and they have agreed to merge their two businesses together. They considered the partnership form of business but have decided to incorporate. You are taking an accounting class at the local community college and have been helping Bill keep the accounting records for his business. He has asked you to stay on and establish and maintain the accounting records for the new company, B&L Landscapes, Inc.

Bill and Larry have hired an attorney and filed the incorporation paperwork with the state of Colorado. In the articles of incorporation, they are authorized to issue 150,000 shares of $1 par value common stock and 5,000 shares of $100 par value, 5%, non-cumulative, non-participating preferred stock. The new corporation will be created on July 1, 2016. The fair value of the assets and liabilities of both companies are as follows:

1. During the first year of operations, B&L Inc. earned net income of $32,500. They also declared a $2,000 dividend on June 10, 2017 payable on June 30, 2017. Prepare an allocation of the dividend to each class of stock.

2. .Prepare the Stockholders Equity section of the **(Partial)** balance sheet for June 30, 2017.

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Bill and Larry have hired an attorney and filed the incorporation paperwork with the state of Colorado. In the articles of incorporation, they are authorized to issue 150,000 shares of $1 par value common stock and 5,000 shares of $100 par value, 5%, non-cumulative, non-participating preferred stock. The new corporation will be created on July 1, 2016. The fair value of the assets and liabilities of both companies are as follows Account Cash Accounts Receivable Prepaid Insurance Inventory Land Building Equipment Accounts Payable Notes Payable (due 4/30/2026) Bill's Lawn Care $11,500 500 500 1,000 9,000 35,000 5,000 Larry's Sprinkler Systems $11,000 3,000 Cash Accounts Receivable Prepaid Insurance Inventory Equipment Accounts Payable 1,000 10,000 5,000 Bill and Larry have decided that they will each receive 1 share of common stock for every dollar of working capital (assets less liabilities) they contribute to the new company. You may assume that all the assets and liabilities listed above will be part of the new company. Additionally, they issue stock as follows: Ju Ju Issued 50 shares of preferred stock for $100 per share cash to Bill's father Issued 20 shares of preferred stock for $100 per share cash to Larry's mother