Question

Prepare the issuer’s journal entry for each of the following separate transactions.

a. On March 1, Atlantic Co. issues 42,500 shares of $4 par value common stock for $297,500 cash.
b. On April 1, OP Co. issues no-par value common stock for $70,000 cash.
c. On April 6, MPG issues 2,000 shares of $25 par value common stock for $45,000 of inventory, $145,000 of machinery, and acceptance of a $94,000 note payable.

Answer 1

The Journal entries are as follows:

(i) On March 1,

Cash A/c Dr. $297,500

To common stock (42,500 × $4) $170,000

To paid in capital in excess of par value $127,500

(To record the issuance of common stock)

(ii) On April 1,

Cash A/c Dr. $70,000

To common stock $70,000

(To issue no-par value common stock)

(iii) On April 6,

Inventory A/c Dr. $45,000

Machinery A/c Dr. $145,000

To common stock (2,000 × $25) $50,000

To paid in capital in excess of par value $46,000

To Note payable $94,000

(To record the issuance of common stock)