The owners are desirous of comparing several financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020 and that Mulatto Companys charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock.

• Issued 65,000 shares of common stock. Stock has par value of 0.40 per share and was issued at $30 per share.

• Issued 10,000 shares of preferred stock at par value as payment in exchange for legal services.

• Exchanged 200,000 shares of common stock for land with an appraised value of $500,000 and a building with an appraised value of $700,000.

• Earned Net income $750,000.

• Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

Using the info above and as a guide:

2. Prepare the journal entries with narrations to record the following:

• The issuances of stock.
• Close out net income to retained earnings.
• Dividend paid.
• Close out dividend to retained earnings.

3. Prepare Mulatto Companys Stockholders equity section of the balance sheet at December 31, 2020.

The following information must be clearly stated/shown:

• information on par values,
• the number of shares authorized and issued where necessary.
• the sub total for the total paid in capital.
• Retained earnings.
• total stockholders equity.