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Chapter 15: Question 1E (page 812)

(Recording the Issuances of Common Stock) During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.

Jan. 10 Issued 80,000 shares for cash at \(6 per share.

Mar. 1 Issued 5,000 shares to attorneys in payment of a bill for

\)35,000 for services rendered in helping the company to

incorporate.

July 1 Issued 30,000 shares for cash at \(8 per share.

Sept. 1 Issued 60,000 shares for cash at \)10 per share.

Instructions

  1. Prepare the journal entries for these transactions, assuming that the common stock has a par value of \(5 per share.
  2. Prepare the journal entries for these transactions, assuming that the common stock is no-par with a stated value of \)3 per share.

Short Answer

Expert verified

Issuing a share requires a company to pass a journal entry such that the cash account is debited and the common stock account is credited.

Step by step solution

01

Meaning of Shares

Shares are regarded as one of the finest long-term investments, outperforming property, corporate bonds, government bonds, and other asset classes. This helps the investor for investing their money in the long term.

02

Preparing Journal Entries assuming that the Common Stock has a par value of $5 per share.

Date

Particular

Folio

Debit $

Credit $

January 10

Cash A/c

480,000

Common stock

400,000

Paid-in Capital in excess of par

Common stock A/c

80,000

To record the issue of share.

March 1

Organizational Expense A/c

35,000

Common stock

25,000

Paid-in Capital in excess of par

Common stock A/c.

10,000

To record the issue of share.

July 1

Cash A/c.

240,000

Common stock

150,000

Paid-in Capital in excess of par

Common stock A/c.

90,000

To record the issue of share.

September 1

Cash A/c.

600,000

Common stock

300,000

Paid-in Capital in excess of par

Common stock A/c.

300,000

To record the issue of share.

03

Preparing Journal Entries assuming that the Common Stock is no-par with a stated value of $3 per share.

Date

Particular

Folio

Debit $

Credit $

January 10

Cash A/c.

480,000

Common stock

240,000

Paid-in Capital in excess of par

Common stock A/c.

240,000

To record the issue of share.

March 1

Organizational Expense A/c

35,000

To Common stock

15,000

To Paid-in Capital in excess of stated

Value Common stock A/c

20,000

To record the issue of share.

July 1

Cash A/c

240,000

Common stock

90,000

Paid-in Capital in excess of stated

value common stock A/c

150,000

To record the issue of share.

September 1

Cash A/c

600,000

Common stock

180,000

Paid-in Capital in excess of stated

value -Common stock A/c

420,000

To record the issue of share.

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Most popular questions from this chapter

Explain how underwriting costs and accounting and legal fees associated with the issuance of stock should be recorded.

Where in the financial statements is preferred stock normally reported?

Stock splits and stock dividends may be used by a corporation to change the number of shares of its stock outstanding.

  1. What is meant by a stock split effected in the form of a dividend?
  2. From an accounting viewpoint, explain how the stock split effected in the form of a dividend differs from an ordinary stock dividend.
  3. How should a stock dividend that has been declared but not yet issued be classified in a balance sheet? Why?

Wilco Corporation has the following account balances at December 31, 2017.

Common stock, \(5 par value \) 510,000

Treasury stock 90,000

Retained earnings 2,340,000

Paid-in capital in excess of par鈥攃ommon stock 1,320,000

Prepare Wilco鈥檚 December 31, 2017, stockholders鈥� equity section.

(Recording the Issuance of Common and Preferred Stock) Kathleen Battle Corporation was organized on January 1, 2017. It is authorized to issue 10,000 shares of 8%, \(100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of \)1 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at \(5 per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at \)108 per share.

Apr. 1 Issued 24,000 shares of common stock for land. The asking price of

the land was \(90,000; the fair value of the land was \)80,000.

May 1 Issued 80,000 shares of common stock for cash at \(7 per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of

their bill of \)50,000 for services rendered in helping the company

organize.

Sept. 1 Issued 10,000 shares of common stock for cash at \(9 per share.

Nov. 1 Issued 1,000 shares of preferred stock for cash at \)112 per share.

Instructions

Prepare the journal entries to record the above transactions.
See all solutions

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