Lighthouse Company began operations on January 1. Authorized were 25,000 shares of $1 par value common stock and 5,000 shares of 10%, $100 par value convertible preferred stock. The following transactions involving stockholders equity occurred during the first year of operations:

Jan. 1 Issued 1,000 shares of common stock to the corporation promoters in exchange for property valued at $23,000 and services valued at $5,000. The property had cost the promoters $18,000 three years before and was carried on the promoters books at $15,000.

Feb. 23 Issued 1,500 shares of convertible preferred stock with a par value of $100 per share. Each share can be converted to five shares of common stock. The stock was issued at a price of $120 per share, and the company paid $6,000 to an agent for selling the shares.

Mar. 10 Sold 2,500 shares of the common stock for $26 per share. Issue costs were $2,000.

Apr. 10 Sold 5,000 shares of common stock under stock subscriptions at $37 per share. No shares are issued until a subscription contract is paid in full. No cash was received.

July 14 Exchanged 1,200 shares of common stock and 190 shares of preferred stock for a building with a fair market value of $72,000. The building was originally purchased for $65,000 by the investors and has a book value of $48,000. In addition, 900 shares of common stock were sold for $27,000 in cash.

Aug. 3 Received payments in full for half of the stock subscriptions and payments on account on the rest of the subscriptions. Total cash received was $138,000. Shares of stock were issued for the subscriptions paid in full.

Dec. 1 Declared a cash dividend of $10 per share on preferred stock, payable on December 31 to stockholders of record on December 15, and a $1.50-per-share cash dividend on common stock, payable on January 5 of the following year to stockholders of record on December 15. (No dividends are paid on unissued subscribed stock.)

31 Paid the preferred stock dividend.

31 Received notice from holders of stock subscriptions for 1,000 shares that they would not pay further on the subscriptions because the price of the stock had fallen to $19 per share. The amount still due on those contracts was $35,000. Amounts previously paid on the contracts are forfeited according to the agreements.

Net income for the first year of operations was $80,000. Assume that revenues and expenses were closed to a temporary account, Income Summary. Use this account to complete the closing process.

Instructions:

1. Prepare journal entries to record the preceding transactions on Lighthouse books.

2. Prepare the Stockholders Equity section of the balance sheet at December 31 for Lighthouse.

13-48 Name: Enter appropriate account titles by selecting from the drop-down lists provided in the blue-shaded cells in columns D and E, and enter the appropriate amounts in the blue-shaded cells in columns H and J. The word "Wrong" will appear to the left of incorrect entries. General Journal Date Jan. 1 Feb. 23 Mar. 10 Apr. 10 July 14 Account Title Property Organization Expense Common Stock Paid-In Capital in Excess of Par - Common Issued 1,000 shares of $1 par common stock in exchange for property and services rendered. Cash Preferred Stock Paid-In Capital in Excess of Par - Preferred Sold 1,500 shares of $100 par preferred stock at $120 per share less $6,000 commission. Cash Common Stock Paid-In Capital in Excess of Par - Common Sold 2,500 shares of $1 par common stock at $26 per share less issue costs of $2,000. Common Stock Subscriptions Receivable Common Stock Subscribed Paid-In Capital in Excess of Par - Common Received subscriptions for 5,000 shares of $1 par common stock at $37 per share. Building Debit 23,000 5,000 1,000 27,000 174,000 150,000 24,000 63,000 2,500 60,500 185,000 5,000 180,000 72,000 Common Stock Paid-In Capital in Excess of Par - Common Preferred Stock Paid-In Capital in Excess of Par - Preferred Sold 900 shares of $1 par common stock at $30 per share and exchanged 1,200 shares of $1 par common stock and 190 shares of $100 par preferred stock for a building. Aug. 3 Cash Credit Wrong Wrong 1,200 34,800 19,000 17,000 138,000 Common Stock Subscriptions Receivable Common Stock Subscribed Common Stock Collected cash on subscriptions and issued 2,500 shares of $1 par common stock. 138,000 2,500 2,500 Dec. 1 31 31 31 Dividends or Retained Earnings Dividends Payable Declared $10 per share cash dividends on_x000D_preferred stock; and $1.50 per share dividend on common stock Dividends Payable Cash Paid $10 per share dividend on preferred stock. Common Stock Subscribed Paid in Capital in Excess of Par - Common Common Stock Subscriptions Receivable Paid-In Capital from Forfeited Stock Subscriptions Subscribers defaulted on 1,000 shares previously subscribed at $37 per share. Income Summary Retained Earnings To close Income Summary. Stockholders' Equity Contributed capital: Preferred stock, $100 par, convertible, 5,000 shares authorized 1,690 shares issued and outstanding Paid-in capital in excess of par - preferred Common stock, $1 par, 25,000 shares authorized, 8,100 shares issued and outstanding Common stock subscribed Paid-in capital in excess of par - common Paid-in capital from forfeited stock subscriptions Total contributed capital Retained earnings Total contributed capital and retained earnings Less: Common stock subscriptions receivable Total stockholders' equity 29,050 29,050 16,900 16,900 80,000 80,000