Santana Rey created Business Solutions on October 1, 2015. The company has been successful, and Santana plans to expand her business. She believes that an additional $86,000 is needed and is investigating three funding sources.

a.	Santanas sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since Santana currently has about $129,000 invested in the business, Cicelys investment will mean that Santana will maintain about 60% ownership, and Cicely will have 40% ownership of Business Solutions.
b.	Santanas uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock.
c.	Santanas banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years.

Required:

1.

Prepare the journal entry to reflect the initial $86,000 investment under each of the options (a), (b), and (c).

Record the issue of common stock of $86,000 cash.

Record the issue of preferred stock of $86,000 cash.

Record the issue of a note for $86,000 loan from the bank.

Transaction

General Journal

Debit

Credit

a.	Cash
	Common stock

Record the issue of preferred stock of $86,000 cash.

Record the issue of a note for $86,000 loan from the bank.

Transaction

General Journal

Debit

Credit

b.	Cash
	Preferred stock

Record the issue of a note for $86,000 loan from the bank.

Transaction

General Journal

Debit

Credit

c.	Cash
	Notes payable