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Chapter 15: Question 6BE (page 811)

Moonwalker Corporation issued 2,000 shares of its \(10 par value common stock for \)60,000. Moonwalker also incurred $1,500 of costs associated with issuing the stock. Prepare Moonwalker鈥檚 journal entry to record the issuance of the company鈥檚 stock.

Short Answer

Expert verified

Cash account should be debited with credit account of common stock and paid-in capital in excess of par common stock.

Step by step solution

01

Meaning of Par Value

The term par value helps define the core value of a financial instrument for investment. This is even more useful for determining the profitability of an investment.

02

Preparing Journal Entries of Moonwalker to record the issuance of the company’s stock

Date

Particular

Folio

Debit USD

$

Credit USD

$

Cash A/c ($60,000-$1,150) Dr.

58,500

To common stock A/c (2,000$10) Cr.

20,000

To paid-in capital in excess Cr.

Of par common stock A/c

38,500

(being share issued )

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Most popular questions from this chapter

Briefly discuss the implications of the financial statement presentation project for the reporting of stockholders鈥� equity.

Pistons Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation鈥檚 capital stock.

S.no.

Particular

Folio

Debit \(

Credit \)

May 2

Cash

192,000

Capital Stock

192,000

(Issued 12,000 shares of \(5 par value common stock at \)16 per share)

May 10

Cash

600,000

Capital Stock

600,000

(Issued 10,000 shares of \(30 par value preferred stock at \)60 per share)

May 15

Capital Stock

15,000

Cash

15,000

(Purchased 1,000 shares of common stock for the treasury at \(15 per share)

May 31

Cash

8,500

Capital Stock

5,000

Gain on Sale of Stock

3,500

(Sold 500 shares of treasury stock at \)17 per share)

Instructions

On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders鈥� equity.

  1. Recorded accrued interest earned on a note receivable.
  2. Declared a cash dividend.
  3. Declared and distributed a stock split.
  4. Approved a retained earnings restriction.
  5. Recorded the expiration of insurance coverage that was previously recorded as prepaid insurance.
  6. Paid the cash dividend declared in item 2 above.
  7. Recorded accrued interest expense on a note payable.
  8. Declared a stock dividend.
  9. Distributed the stock dividend declared in item 8.

Instructions

In the following table, indicate the effect each of the nine transactions has on the financial statement elements listed. Use the following code: I = Increase, D = Decrease, NE = No effect.

Item

Asset

Liabilities

Stockholders鈥� Equity

Paid-in Capital

Retained

Earnings

Net Income

Sprinkle Inc. has outstanding 10,000 shares of \(10 par value common stock. On July 1, 2017, Sprinkle reacquired 100 shares at \)87 per share. On September 1, Sprinkle reissued 60 shares at \(90 per share. On November 1, Sprinkle reissued 40 shares at \)83 per share. Prepare Sprinkle鈥檚 journal entries to record these transactions using the cost method.

Ravonette Corporation issued 300 shares of \(10 par value common stock and 100 shares of \)50 par value preferred stock for a lump sum of \(13,500. The common stock has a market price of \)20 per share, and the preferred stock has a market price of $90 per share. Prepare the journal entry to record the issuance.
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