Accounting 202 Quiz 4 Corporate Formation Name You have a g

Accounting 202 Quiz # 4 Corporate Formation Name You have a great idea and want to form a corporation to produce and sell hot air balloons. You think this is the next big opportunity in air travel. You go to the bank to obtain a loan, Your banker gives you the cold shoulder and turns down your loan application. You talk to family and friends about your idea of forming a corporation. However, they think you are full of hot air and will not lend nor invest in your venture. If you can find investors the corporation will have 100,000 shares of authorized common stock with a $1.00 par value. You decide to raise funds online via Crowd Funding There are a number of ways to raise money in the formation of the corporation via \"Crowd Funding\". Journalize each of the following: The funds received do not have to be returned and the contributor does not receive stock in the company nor merchandise. The corporation receives $100,000 from the generosity of the contributors. 1. 2· The contributors paid S 100,000 and received a total of 60,000 shares of common stock. 3. The contributors paid $100,000 and receive hot air balloon kits that cost the corporation $52,000 The contributors paid S100,000 and when production begins the contributors will receive hot air balloon kits. 4. 5. The contributors paid $100,00 and the corporation is required to repay the funds out cf earnings of the business plus interest of 3% per year.

Solution

1. Funds received from contributors out of generosity :

Bank A/c ..Dr. 100000$

To Non-returnable Funds from Contributors A/c. 100000$

2. Contributors gave 100000 and got 60000shares:

1. Bank A/c ..Dr 100000$

To Share application and allotment A/c 100000$

2. Share application and allotment A/c.. Dr. 100000$

To Share Capital A/c (60000*1$) 60000$

To Securities Premium A/c (60000*0.67) 40000$

3.Contributors paid and received hot air balloon kits :

1. Bank A/c.. Dr. 100000$

To Fund from Contributors A/c. 100000$

2. Fund from Contributors A/c..Dr. 100000$

To Sale of hot air balloon A/c. 52000$

To profit on sale of hot air balloon A/c. 48000$

4. Bank A/c.. Dr. 100000$

To Advance money received from Contributors A/c 100000$

5. Funds received to be repaid out of earnings & interest :

1. Bank A/c..Dr. 100000$

To FundsA/c 100000$

2. Funds A/c..Dr. xx

Interest ( @ 3% )A/c..Dr. xx

To Bank A/c. xx

( Last Entry shall depend on the amount which shall be repaid out of the earnings of business in respective years ahead.)