Question

Prepare journal entries to record the following four separate issuances of stock.

1. A corporation issued 3,000 shares of $20 par value common stock for $72,000 cash.
2. A corporation issued 1,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $50,500. The stock has a $3 per share stated value.
3. A corporation issued 1,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $50,500. The stock has no stated value.
4. A corporation issued 750 shares of $50 par value preferred stock for $88,000 cash.

Answer 1

Answer and Explanation:

The journal entries are shown below:

1. Cash $72,000

To Common stock $60,000 (3,000 shares × $20)

To Additional Paid in capital in excess of par value - Common stock $12,000

(Being the issuance of the common stock is recorded)

For recording this we debited the cash as it increased assets and it also increased the overall stockholder equity so common stock and the additional paid in capital for common stock is credited

2. Organization expense Dr $50,500

To Common stock $4,500 (1,500 shares × $3)

To Additional Paid in capital in excess of stated value - Common stock $46,000

(Being the issuance of the common stock is recorded)

For recording this we debited the organization expense as it increased expenses and it also increased the overall stockholder equity so common stock and the additional paid in capital for common stock is credited

3. Organization expense Dr $50,500

To Common stock $50,500

(Being the issuance of the common stock is recorded)

For recording this we debited the organization expense as it increased expenses and it also increased the overall stockholder equity so common stock is credited

4. Cash $88,000

To Preferred stock $37,500 (750 shares × $50)

To Additional Paid in capital in excess of par value - Preferred stock $50,500

(Being the issuance of the preferred stock is recorded)

For recording this we debited the cash as it increased assets and it also increased the overall stockholder equity so preferred stock and the additional paid in capital for preferred stock is credited