Question

Journalize the entries to record the following transactions for Mountain Realty Inc. Refer to the Chart of Accounts for exact wording of account titles.

Aug. 26 Issued for cash 120,000 shares of no-par common stock (with a stated value of $5) at $8.

Oct. 1 Issued at par value 40,000 shares of preferred 1% stock, $10 par for cash.

Nov. 30 Issued for cash 18,000 shares of preferred 1% stock, $10 par at $13.

a) Debit Cash $960,000; Credit Common Stock $960,000
b) Debit Cash $960,000; Credit Preferred Stock $400,000; Credit Common Stock $560,000
c) Debit Cash $960,000; Credit Preferred Stock $400,000; Credit Common Stock $560,000
d) Debit Cash $960,000; Credit Preferred Stock $180,000; Credit Common Stock $780,000

Answer 1

The journal entries for Mountain Realty Inc. record the issuance of common and preferred stock on different dates with the respective debit to Cash and credit to Common Stock, Preferred Stock, and additional paid-in capital accounts.

Step-by-step explanation:

To journalize the transactions for Mountain Realty Inc., you need to record each transaction in the general ledger with appropriate debits and credits.

Transaction on August 26

For the issuance of 120,000 shares of no-par common stock with a stated value of $5 at $8:
Debit Cash for $960,000 (120,000 shares × $8)
Credit Common Stock for 600,000 (120,000 shares × $5 stated value)
Credit Paid-in Capital in Excess of Stated Value - Common Stock for $360,000 ($960,000 – $600,000)

Transaction on October 1

For the issuance of 40,000 shares of preferred 1% stock, $10 par for cash:
Debit Cash for $400,000 (40,000 shares × $10)
Credit Preferred Stock for $400,000

Transaction on November 30

For the issuance of 18,000 shares of preferred 1% stock, $10 par at $13:
Debit Cash for $234,000 (18,000 shares × $13)
Credit Preferred Stock for $180,000 (18,000 shares × $10)
Credit Paid-in Capital in Excess of Par - Preferred Stock for $54,000 ($234,000 – $180,000)