Question

On January 22, Jefferson County Rocks Inc., a marble contractor, issued for cash 77,000 shares of $50 par common stock at $53, and on February 27, it issued for cash 17,040 shares of preferred stock, $10 par at $11. Required: a. Journalize the entries for January 22 and February 27. Refer to the Chart of Accounts for exact wording of account titles. b. What is the total amount invested (total paid-in capital) by all stockholders as of February 27?

Answer 1

A) Journal Entries are in the explanation section

B) Total amount invested by stockholders - $4,268,440

Step-by-step explanation:

Requirement - A)

Date Account Titles & Explanation Debit ($) Credit ($)

For common stock -

Jan-22 Cash (77,000 stocks*$53) 4,081,000

Common stock

($50 par value, 77,000 shares) 3,850,000

Paid-in Capital in excess of par value

($53 - $50 = $3; 77,000 shares) 231,000

As the market value of a stock price is more than par value, there will be additional paid-in capital of $3 per stock. The above journal is made to record the issuance of common stock.

For preferred stock -

Feb-27 Cash (17,040 stocks*$11) 187,440

Preferred stock

($10 par value, 17,040 shares) 170,400

Paid-in Capital in excess of par value - Preferred stock

($11 - $10 = $1; 17,040 shares) 17,040

As the market value of the preferred stock is more than par value, there will be additional paid-in capital of $1 per stock. The above journal is made to record the issuance of preferred stock.

Requirement - B)

Particulars Amount ($)

Common Stock ($50 x 77,000) 3,850,000

Paid-in Capital in excess of par value-Common Stock 231,000

[($53-$50)*77,000]

Preferred stock ($10*17,040) 170,400

Paid-in Capital in excess of par value - Preferred stock 17,040

[($11 - $10)*17,040 shares]

Total invested amount $4,268,440

Therefore, the shareholders invested the par value as well as additional value in order to continue the company's operation.