Question

Finlay, Inc., issued 13,000 shares of $50 par value preferred stock at $70 per share and 17,000 shares of no-par value common stock at $8 per share. The common stock has no stated value. All issuances were for cash. a. Prepare the journal entries to record the share issuances. b. Prepare the journal entry for the issuance of the common stock assuming that it had a stated value of $5 per share. c. Prepare the journal entry for the issuance of the common stock assuming that it had a par value of $1 per share.

Answer 1

cash 910,000 debit

preferred stock 650,000 credit

additional paid-in 260,000 credit

--to record preferred stock issuance--

if par value is $5:

cash 136,000 debit

common stock 85,000 credit

additional paid-in 51,000 credit

--to record common stock issuance--

if par value is $1:

cash 136,000 debit

common stock 17,000 credit

additional paid-in 119,000 credit

--to record common stock issuance--

Step-by-step explanation:

The additional paid-in is the difference between the face value and the market value at which the shares were issued:

proceeds: 13,000 shares x $70 = 910, 000

face value 13,000 shares x $50 = (650,000)

Preferred stock additional paid: 260,000

common stock if par value is $5

proceeds: 17,000 shares x $8 = 136,000

face value: 17,000 shares x $5 = (85,000)

additional paid-in 51,000

common stock if par value is $1

proceeds: 17,000 shares x $8 = 136,000

face value: 17,000 shares x $1 = (17,000)

additional paid-in 119,000