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Chapter 15: Question 2 BE (page 811)

Swarten Corporation issued 600 shares of no-par common stock for \(8,200. Prepare Swarten鈥檚 journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of \)2 per share.

Short Answer

Expert verified

If there is no stated value, the cash account is credited, and common stock is debited. But if there is a stated value, paid-in capital in excess of the stated value is also credited.

Step by step solution

01

Meaning of Common Stock

A sort of investment that indicates a corporation's ownership is referred to as "common stock." The general public elects the board of directors, and they have a role in company decisions. This form of stock ownership frequently yields larger profits over time.

02

Preparing Swarten’s journal entry

S.no

Particular

Folio

Debit USD

$

Credit USD

$

(a)

Cash A/c Dr.

8,200

To common stock Cr.

8,200

(being share issued at no stated value)

(b)

Cash A/c Dr.

8,200

To common stock (600$2) Cr.

1,200

To paid-in capital in excess

Of stated value-common stock Cr.

7,000

(being share issued at stated value)

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Most popular questions from this chapter

Distinguish between common and preferred stock

Seles Corporation鈥檚 charter authorized issuance of 100,000 shares of \(10 par value common stock and 50,000 shares of \)50 preferred stock. The following transactions involving the issuance of shares of stock were completed. Each transaction is independent of the others.

  1. Issued a \(10,000, 9% bond payable at par and gave as a bonus one share of preferred stock, which at that time was selling for \)106 a share.
  2. Issued 500 shares of common stock for equipment. The equipment had been appraised at \(7,100; the seller鈥檚 book value was \)6,200. The most recent market price of the common stock is \(16 a share.
  3. Issued 375 shares of common and 100 shares of preferred for a lump sum amounting to \)10,800. The common had been selling at \(14 and the preferred at \)65.
  4. Issued 200 shares of common and 50 shares of preferred for equipment. The common had a fair value of \(16 per share; the equipment has a fair value of \)6,500.

Instructions

Record the transactions listed above in journal entry form.

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.

The following comment appeared in the notes of Colorado Corporation鈥檚 annual report: 鈥淪uch distributions, representing proceeds from the sale of Sarazan, Inc., were paid in the form of partial liquidating dividends and were in lieu of a portion of the Company鈥檚 ordinary cash dividends.鈥� How would a partial liquidating dividend be accounted for in the financial records?

What are the principal considerations of a board of directors in making decisions involving dividend declarations? Discuss briefly.
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