Acc201 Survey of Accounting: P8-4 Sheldon Optics produces medical lasers

Acc201 Survey of Accounting

P8-4 Stock transactions for corporate expansion
Sheldon Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Sheldon Optics on October 31 of the current year as follows:
Preferred 2% stock, $80 par (50,000 shares authorized, 25,000 shares issued) $2,000,000
Paid-in capital in excess of Par-preferred stock 75,000
Common Stock, $100 par (500,000 shares authorized, 50,000 shares issued) 5,000,000
Paid-in capital in excess of par-common stock 600,000
Retained earnings 16,750,000

At the annual stockholders meeting on December 7, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $5,300,000. The plan provided (a) that the corporation borrow $2,000,000 , (b) that 15,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that a building, valued at $1,850,000, and the land on which it is located, valued at $162,500, be acquired in accordance with preliminary negotiations by the issuance of 17,500 shares of common stock. The plan was approved by stockholders and accomplished by the following transactions:
Jan 10 Borrowed 2,000,000 from Whitefish National Bank, giving a 7% mortgage note.
Jan 21 Issued 15,000 shares of preferred stock, receiving $84.50 per share in cash.
Jan 31 Issued 17,500 shares of common stock in exchange for land and a building, according to the plan.

No other transactions occurred during January.

Instructions:
Illustrate the effects on the accounts and financial statements of each of the preceding transactions.
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