Question

Prepare journal entries to record the following four separate issuances of stock. A corporation issued 7,000 shares of $10 par value common stock for $84,000 cash. A corporation issued 3,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $43,000. The stock has a $1 per share stated value. A corporation issued 3,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $43,000. The stock has no stated value. A corporation issued 1,750 shares of $100 par value preferred stock for $218,000 cash.

Answer 1

DEBIT $ 84.000 Cash

CREDIT $ 70.000 Common Stock

CREDIT $ 14.000 Paid-In Capital in Excess of Par Value

DEBIT $ 43.000 Promotion Expenses

CREDIT $ 3.500 Common Stock

CREDIT $ 39.500 Paid-In Capital in Excess of Par Value

DEBIT $ 43.000 Promotion Expenses

CREDIT $ 43.000 Common Stock

DEBIT $ 218.000 Cash

CREDIT $ 175.000 Preferred Stock

CREDIT $ 43.000 Paid-In Capital in Excess of Par Value

Step-by-step explanation:

DEBIT $ 84.000 Cash

CREDIT $ 70.000 Common Stock

CREDIT $ 14.000 Paid-In Capital in Excess of Par Value

As the company declared a par value, it's necessary to split the equity in two accounts, Common Stock

for the stated value ($70,000) and the Paid in Capital for the excess of cash over the Common Stock ($14,000)

DEBIT $ 43.000 Promotion Expenses

CREDIT $ 3.500 Common Stock

CREDIT $ 39.500 Paid-In Capital in Excess of Par Value

As the company declared a par value, it's necessary to split the equity in two accounts, Common Stock

for the stated value ($3,500) and the Paid in Capital for the excess of the price over the Common Stock ($39,500)

In this case there is no cash because the shares are in exchange for the promotions effort (Expenses)

DEBIT $ 43.000 Promotion Expenses

CREDIT $ 43.000 Common Stock

As the company declared no-par value, it's not necessary to split the equity in two accounts, full value to common stocks account

In this case there is no cash because the shares are in exchange for the promotions effort (Expenses)

DEBIT $ 218.000 Cash

CREDIT $ 175.000 Preferred Stock

CREDIT $ 43.000 Paid-In Capital in Excess of Par Value

Last escenario the company declared preffered stock and not Common ones, so the equity account in this case it's Preferred stock

as the par value it's $100 ($175,000) to Preferred Stock and Paid in Capital for the excess of the price ($43,000)