Question

On-Line Learning Corporation obtained a charter at the beginning of this year that authorized 52,000 shares of no-par common stock and 23,000 shares of preferred stock, par value $10. The corporation was organized by four individuals who purchased a total of 20,000 shares of the common stock. The remaining shares were to be sold to other individuals. During the year, the following selected transactions occurred:

a.Collected $20 cash per share from the four organizers and issued 5,000 shares of common stock to each of them.
b.Sold 6,000 shares of common stock to an outsider at $40 cash per share.
c.Sold 7,000 shares of preferred stock at $30 cash per share.

Required: 1. Prepare the journal entries indicated for each of these transactions.

Answer 1

The On-Line Learning Corporation obtained a charter at the beginning of the year to issue 52,000 no-par common stock shares and 23,000 preferred stock shares with a par value of $10. The journal entries for the described transactions are provided.

Step-by-step explanation:

In the given scenario, On-Line Learning Corporation obtained a charter at the beginning of the year authorizing 52,000 no-par common stock shares and 23,000 preferred stock shares with a par value of $10. Four individuals, the organizers, purchased a total of 20,000 common stock shares. The remaining shares were to be sold to other individuals. The following transactions occurred during the year:

1. Collected $20 cash per share from the four organizers and issued 5,000 shares of common stock to each of them.
2. Sold 6,000 shares of common stock to an outsider at $40 cash per share.
3. Sold 7,000 shares of preferred stock at $30 cash per share.

The journal entries for each of these transactions are as follows:

1. Debit Cash $80,000; Credit Common Stock $80,000
2. Debit Cash $240,000; Credit Common Stock $240,000
3. Debit Cash $210,000; Credit Preferred Stock $210,000