Early in the year Bill Barnes and several friends organized a corporation called Barnes Communications, Inc.

Early in the year Bill Barnes and several friends organized a corporation called Barnes Communications, Inc. The corporation was authorized to issue 50,000 shares of $100 par value, 10 percent cumulative preferred stock and 400,000 shares of $2 par value common stock. The following transactions (among others) occurred during the year:Jan. 6Issued for cash 20,000 shares of common stock at $14 per share. The shares were issued to Barnes and 10 other investors.Jan. 7Issued an additional 500 shares of common stock to Barnes in exchange for his services in organizing the corporation. The stockholders agreed that these services were worth $7,000.Jan. 12Issued 2,500 shares of preferred stock for cash of $250,000.June 4Acquired land as a building site in exchange for 15,000 shares of common stock. In view of the appraised value of the land and the progress of the company, the directors agreed that the common stock was to be valued for purposes of this transaction at $15 per share.Nov. 15The first annual dividend of $10 per share was declared on the preferred stock to be paid December 20. (Hint: Record the dividend by debiting Dividends and crediting Dividends Payable.)Dec. 20Paid the cash dividend declared on November 15.Dec. 31After the revenue and expenses were closed into the Income Summary account, that account indicated a net income of $147,200.Instructionsa.Prepare journal entries in general journal form to record the above transactions. Include entries at December 31 to close the Income Summary account and the Dividends account.b.Prepare the stockholders’ equity section of the Barnes Communications, Inc., balance sheet at December 31.(Amounts in parentheses do not require a minus sign in front of them. Omit the “$” sign in your response.)a.General Journal 20__ Issued 20,000 shares of $2 par value common stock at $14 per share. Issued 500 shares of common stock to Barnes in exchange for services relating to formation of the corporation. Implied issuance price ($7,000 ÷ 500 shares) = $14 per share. Issued 2,500 shares of $100 par value, 10%, cumulative preferred stock at par value. Issued 15,000 shares of common stock in exchange for land valued at $225,000 (15,000 shares × $15). To record declaration of annual dividend of $10 per share on 2,500 preferred shares outstanding. Payable Dec. 20. To record payment of dividend declared Nov. 15. To close the Income Summary account for the year. To close the Dividends account. b.BARNES COMMUNICATIONS, INC. Partial Balance Sheet December 31, 20__ Stockholders’ equity: ________________________________________* ________________________________________ ________________________________________________________________________________ *Computation of retained earnings at December 31, 20__: Less: Preferred dividends in 20__( ) ________________________________________

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