Earth Star Diamonds Inc. began a potentially lucrative mining operation on October 1, 2020. It is authorized to issue 100,000 shares of $0.60 cumulative preferred shares and 500,000 common shares. The company uses the cash dividends account to keep track of all dividends declared. Part A Required: Prepare journal entries for each of the transactions listed.

Oct.	1		Issued for cash, 1,000 shares of the preferred shares at $5.80 each.
	10		Issued for cash, 60,000 shares of the common stock at $4.60 per share.
	15		Earth star purchased land for $196,000, paying cash of $71,000 and borrowing the balance from the bank (to be repaid in two years).
	20		20,000 preferred shares were issued today for total cash proceeds of $114,800.
	24		In addition to the declaration of the annual dividend on the preferred shares, dividends of $26,980 were declared on the common shares today, payable November 15, 2020.
	31		Revenues of $1,000,000 were earned during the month; all cash. Expenses, all cash, totalling $350,000 were incurred in October. Close the Income Summary and dividend accounts.

• 1

  Record the issue of preferred shares.

• 2

  Record the issue of common shares.

• 3

  Record the purchase of land in exchange for cash and a note.

• 4

  Record the issue of preferred shares for cash.

• 5

  Record the dividends declared on common and preferred shares.

• 6

  Record the revenues earned.

• 7

  Record the expenses incurred.

• 8

  Record to close the income summary account.

• 9

  Record to close the cash dividends account, assuming Retained Earnings was not debited directly when dividends were declare.

• Part B

• Required:Based on the transactions in Part A, prepare the balance sheet as at October 31, 2020.