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P15-1 (Equity Transactions and Statement Preparation) On January 5, 2010, Phelps Corporation received a charter granting the right to issue 5,000

P15-1
(Equity Transactions and Statement Preparation) On January 5, 2010, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10 par value common stock. It then completed these transactions.


Jan. 11 Issued 20,000 shares of common stock at $16 per share.
Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: machinery with a fair market value of $50,000; a factory building with a fair market value of $160,000; and land with an appraised value of $270,000.
July 29 Purchased 1,800 shares of common stock at $17 per share. (Use cost method.)
Aug. 10 Sold the 1,800 treasury shares at $14 per share.
Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a $175,700 net income.







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Solution:
January 11
Cash (20,000 X $16)............................................................................
Common Stock (20,000 X $10) ...................................................

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