Question

Maine Corporation has two classes of stock: Common, 3.00 par; Preferred, $30.00 par. Journalize Maine's issuance of the following:

1. 1,000 shares of common stock for $9.00 per share.
2. 1,000 shares of preferred stock for a total of $30,000.00

Answer 1

1) Cost of 1 share = $9.00

No. of shares = 1000

Total cost of shares = $9000

Hence, the shares are issued at a premium of $6.

Profit through premium on 1000 shares = 6×1000 = $6000

2) Total cost of shares = $30,000

Number of shares = 1000

Cost of 1 share = $30.

Hence, the shares are issued at par value with no profit no loss.