CC13 COOKIE CREATIONS
(a) 1. One of the major advantages of issuing preferred shares is that
the preferred stockholder does not have voting rights. In this case,
Curtis’s dad and Natalie’s grandmother can participate in the future
success of Cookie & Coffee Creations Inc. (by receiving annual
dividends) without attempting to influence any decisions that would
require shareholder approval.
2. It is possible to pay for the $750 legal bill by issuing common shares.
However, the cost principle still applies. Cost must equal the cash
equivalent price, which is generally the fair value
of the consideration given up. If this amount cannot be determined, we
CC13 (Continued)
GENERAL JOURNAL
J1
Date
Account Titles and Explanation
Debit
Credit
(b)
Nov. 1 Cash ………………………………………….. 19,130
Accounts Receivable ………………….. 900
Common Stock ……………………….. 25,180
(c)
Nov. 1 Cash ………………………………………….. 10,000
Preferred Stock ……………………….. 10,000
CC13 (Continued)
(d) COOKIE & COFFEE CREATIONS INC.
Balance Sheet
November 1, 2017
______________________________________________________________
Assets
Current assets
Cash ………………………………………………………………….. $29,130
Accounts receivable …………………………………………… 900
Stockholders’ Equity
Paid-in capital
$0.50 preferred stock, no par value, noncumulative,
10,000 authorized, 2,000 shares issued ………….. $10,000
Common stock, no par value, 100,000