Early in the year Bill Sharnes and several friends organized a corporation called Sharnes Commu-

nications, 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. 6 Issued for cash 20,000 shares of common stock at $14 per share. The shares were

issued to Sharnes and 10 other investors.

Jan. 7 Issued an additional 500 shares of common stock to Sharnes in exchange for his

services in organizing the corporation. The stockholders agreed that these services

were worth $7,000

Jan. 12 Issued 2,500 shares of preferred stock for cash of $250,000.

June 4 Acquired 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. 15 The first annual dividend of $10 per share was declared on the preferred stock to be

paid December 20.

Dec. 20 Paid the cash dividend declared on November 15.

Dec. 31 After the revenue and expenses were closed into the Income Summary account, that

account indicated a net income of $147,200.

Instructions

a.

Prepare journal entries in general journal form to record these transactions. Include entries at

December 31 to close the Income Summary account and the Dividends account.

b.

Prepare the stockholders' equity section of the Sharnes Communications, Inc., balance sheet

at December 31.