Question

Prepare journal entries to record each of the following four separate issuances of stock. A corporation issued 4,000 shares of $20 par value common stock for $96,000 cash. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $28,500. The stock has a $1 per share stated value. A corporation issued 2,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $28,500. The stock has no stated value. A corporation issued 1,000 shares of $100 par value preferred stock for $128,500 cash.

Answer 1

1.

Dr. Cash $96,000

Cr. Common Stock $80,000

Cr. Paid in capital excess of Par common stock $16,000

2.

Dr. Expenses $28,500

Cr. common stock $28,500

3.

Dr. Expenses $28,500

Cr. Common stock $2,000

Cr. Paid in capital excess of Par common stock $26,500

4.

Dr. Cash $128,500

Cr. Common Stock $100,000

Cr. Paid in capital excess of Par common stock $28,500

Step-by-step explanation:

1

Par value of the share and amount excess of par is recorded in separate accounts.

Common Stock = 4,000 x $20 = $80,000

Paid-in Capital = $96,000 - $80,000 = $16,000

2.

Expenses are recorded against the issuance by debit entry in expense account.

Stock which has no par value is recorded in the common stock account.

3.

Expenses are recorded against the issuance by debit entry in expense account.

4.

Par value of the share and amount excess of par is recorded in separate accounts.