Question

Issuing Stock Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 75,000 shares of preferred 3% stock, $60 par and 550,000 shares of $15 par common stock. The following selected transactions were completed during the first year of operations:

Feb. 5. Issued 700,000 shares of common stock at par for cash.
5. Issued 1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr. 9. Issued 40,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $ 120,000, $280,000, and $80,000, respectively.
June 14. Issued 25,000 shares of preferred stock at $82 for cash.

Required:
Journalize the transactions.

Answer 1

Professional Products, Inc.

Journal Entries:

Feb. 5. Debit Cash $10,500,000

Credit Common stock $10,500,000

To record the issuance of 700,000 shares of common stock at par for cash.

Feb. 5. Debit Attorney Fees $18,000

Credit Common stock $18,000

To record the issuance of 1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.

Apr. 9. Debit Land $120,000

Debit Buildings $280,000

Debit Equipment $80,000

Debit Additional paid-in Capital - Common stock $120,000

Credit Common stock $600,000

To record the issuance of 40,000 shares of common stock in exchange.

June 14. Debit Cash $2,050,000

Credit 3% Preferred stock $1,500,000

Credit Additional Paid-in Capital $550,000

To record the issuance of 25,000 shares of preferred stock at $82 for cash.

Step-by-step explanation:

a) Data and Calculations:

Authorized share capital:

75,000 shares of 3% preferred stock, $60 par

550,000 shares of common stock, $15 par

Transactions Analysis:

Feb. 5. Cash $10,500,000 Common stock $10,500,000

700,000 shares of common stock at par for cash.

5. Attorney Fees $18,000 Common stock $18,000

1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.

Apr. 9. Land, buildings, and equipment with fair market prices of $120,000, $280,000, and $80,000 Additional paid-in Capital - Common stock $120,000 Common stock $600,000

40,000 shares of common stock in exchange

June 14. Cash $2,050,000 3% Preferred stock $1,500,000 Additional Paid-in Capital $550,000

25,000 shares of preferred stock at $82 for cash.