Wetland Corporation, a private corporation, was organized on February 1, 2013. It is authorized to issue 100,000, $6 noncumulative preferred shares, and an unlimited number of common shares. The following transactions were completed during the first year:
Feb. 10 Issued 80,000 common shares at $4 per share.
Mar. 1 Issued 5,000 preferred shares at $115 per share.
Apr. 1 Issued 22,500 common shares for land. The asking price of the land was $100,000 and its appraised value was $90,000.
June 20 Issued 78,000 common shares at $4.50 per share.
July 7 Issued 10,000 common shares to lawyers to pay for their bill of $45,000 for services they performed in helping the company organize.
Sept. 1 Issued 10,000 common shares at $5 per share.
Nov. 1 Issued 1,000 preferred shares at $117 per share.
Instructions
(a) Journalize the transactions.
(b) Open general ledger accounts and post to the shareholders' equity accounts.
(c) Determine the number of shares issued and the average cost per share for both common and preferred shares.
(d) How many more shares is the company authorized to issue for each class of shares?
(e) If the preferred shares were cumulative instead of noncumulative, would this have changed the amount investors were willing to pay for the shares? Explain.
Taking It Further
If Wetland was a public corporation, how might that affect the journal entry recorded for the April 1 and July 7 issues of common shares?