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, 2014. The fair value of the assets and liabilities of both companies are as follows:

Account	Bills Lawn Care
Cash	$12,500
Accounts Receivable	500
Prepaid Insurance	500
Inventory	1,000
Land	8,000
Building	25,000
Equipment	7,500
Accounts Payable	5,000
Notes Payable (due 4/30/2024)	45,000
	Larrys Sprinkler Systems
Cash	$10,000
Accounts Receivable	3,000
Prepaid Insurance	1,000
Inventory	5,000
Equipment	11,000
Accounts Payable	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:

Jul 1Issued 30 shares of preferred stock for $100 per share cash to Bills father.

Jul 1Issued 20 shares of preferred stock for $100 per share cash to Larrys mother.

Instructions:

Using the chart of accounts provided below, and the Excel template provided with this assignment, prepare journal entries, in good form, to record the creation of B&L Landscapes, Inc. and the issuance of stock. Use July 1 for the creation journal entries. Start with Page 1 of the General Journal. Explanations are optional.

Prepare a classified balance sheet for B&L Landscapes, Inc. for July 1, 2014.

During the first year of operations, B&L Inc. earned net income of $22,500. They also declared a $2,000 dividend on June 10, 2015 payable on June 30, 2015. Prepare an allocation of the dividend to each class of stock.

Record the journal entries for the dividend declaration and payment on Page 2 of the General Journal. Explanations are optional.

Prepare the Stockholders Equity section of the balance sheet for June 30, 2015.

B&L Landscapes, Incorporated

Chart of Accounts

Classification	Account Number	Account Name
ASSETS	101	Cash
	110	Accounts Receivable
	112	Allowance for Doubtful Accounts
	115	Notes Receivable
	116	Interest Receivable
	120	Supplies
	130	Prepaid Insurance
	140	Inventory
	150	Land
	152	Building
	153	Equipment
	155	Accumulated Depreciation Building
	156	Accumulated Depreciation Equipment
LIABILITIES	201	Accounts Payable
	220	Notes Payable
	225	Interest Payable
	280	Dividends Payable
STOCKHOLDERS EQUITY	301	Common Stock
	310	Preferred Stock
	330	Cash Dividends
	350	Retained Earnings
REVENUES	401	Lawn Service Revenue
	410	Sales Revenue
	415	Sales Returns and Allowances
	420	Interest Income
COST OF GOODS SOLD	501	Purchases
	505	Purchase Returns and Allowances
EXPENSES	620	Supplies Expense
	630	Fuel Expense
	640	Repair and Maintenance Expense
	650	Advertising Expense
	65	Organization Expense
	660	Insurance Expense
	670	Depreciation Expense
	680	Interest Expense
	690	Bad Debt Expense