Solved by verified expert :Uzi Company received a charter granting
the right to issue 200,000 shares of $1.00 par value common stock and 10,000 shares
of 8% cumulative and nonparticipating, $50.00 par value preferred stock that is
callable at $80.00 per share. Selected transactions are presented below.
20X1
Feb. 19 Issued 45,000 shares of common stock at par for cash.
22 Gave the corporation’s promoters 30,000 shares of common stock for their
services in getting the corporation organized. The directors valued the
services at $50,000.
Mar 30 Exchanged 100,000 shares of common stock for the following assets at
fair market values: land, $25,000; building, $100,000; and machinery, $125,000.
Dec. 31 Closed the Income Summary account. A $25,000 loss was incurred.
20X2
Jan.12 Issued 1,000 shares of preferred stock at $75 per share.
Dec. 15 The board of directors declared an 8% dividend on preferred shares and
$0.10 per share on outstanding common shares, payable on January 31 to the
January 17 stockholders of record.
31 Closed the Income Summary account. A $69,000 net income was earned.
20X3
Jan. 31 Paid the previously declared dividends.
Required:
1. Prepare general journal entries to record the selected transactions.
2. Prepare a stockholders’ equity section as of the close of business on
December 31, 20X2.
3. Determine the book value per preferred share and per common stock as of
December 31, 20X2.
4. Provide a rationale between 200 and 300 words in length for buying or not
buying this stock based on the financial information presented.
