Question

On January 22, Jefferson County Rocks Inc., a marble contractor, issued for cash 25,000 shares of $20 par common stock at $68, and on February 27, it issued for cash 130,000 shares of preferred stock, $8 par at $11.What is the total amount invested (total paid-in capital) by all stockholders as of February 27?

Answer 1

$3,130,000

Step-by-step explanation:

For computing the total amount invested, first we have to pass the journal entries which are shown below:

Cash A/c Dr $1,700,000 (25,000 shares × $68)

To Common Stock $500,000 (25,000 shares × $20)

To Additional Paid-in Capital in excess of par - Common Stock $1,200,000

(Being the issuance of stock is recorded and the remaining balance is credited to the additional paid-in capital account)

Cash A/c Dr $1,430,000 (130,000 shares × $11)

To Preferred Stock $1,040,000 (130,000 shares × $8)

To Additional Paid-in Capital in excess of par - Preferred Stock $390,000

(Being the issuance of stock is recorded and the remaining balance is credited to the additional paid-in capital account)

Now the total amount invested would be

= $500,000 + $1,200,000 + $1,040,000 + $390,000

= $3,130,000