Question

(recording the issuance of common and preferred stock)

Kathleen Battle Corporation was organized on January 1, 2017. It is authorized to issue 10,000 shares at 8%, $100 par value perferred stock, and 500,000 shares of no-par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.

Jan. 10 - issued 80,000 shares of common stock for cash at $5 per share

March 1 - issued 5,000 shares of perferred stock for cash at $108 share

April 1 - issued 24,000 shares of common stock for land. The asking price of the land was $90,000, the fair value of the land was s$80,000

May 1 - Issued 80,000 shares of common stock for cas at $7 per share

Aug. 1 - Issued 10,000 shares of common stock to attorneys in payment of their bill of $50,000 for services rendered in helping the company organize.

Sept 1 - issued 10,000 shares of common stock for cash at $9 per share

Nov. 1 - issued 1,000 shares of preferred stock for cash at $112 per share

Instructions: Prepare the journal entries to record the above transactions

Answer 1

Answers:

Journal Entry

No.	Date	Account Titles	Debit	Credit
1	Jan. 10	Cash	400,000
		Common Stock		80,000
		Paid-in Capital in Excess of Stated Value - Common Stock		320,000
		To record issuance of 80,000 shares of common stock for cash at $5 per share
2	Mar. 1	Cash	540,000
		Preferred Stock		500,000
		Paid-in Capital in Excess of Pare - Preferred Stock		40,000
		To record issuance of 5,000 shares of perferred stock for cash at $108 share
3	Apr. 1	Land	80,000
		Common Stock		24,000
		Paid-in Capital in Excess of Stated Value - Common Stock		56,000
		To record issuance of 24,000 shares of common stock for land at fairvalue of $80,000
4	May. 1	Cash	560,000
		Common Stock		80,000
		Paid-in Capital in Excess of Stated Value - Common Stock		480,000
		To record issuance of 80,000 shares of common stock for cash at $7 per share
5	Aug. 1	Organization Expense	50,000
		Common Stock		10,000
		Paid-in Capital in Excess of Stated Value - Common Stock		40,000
		To record issuance of 10,000 shares of common stock to attorneys in payment of their bill of $50,000
6	Sept. 1	Cash	90,000
		Common Stock		10,000
		Paid-in Capital in Excess of Stated Value - Common Stock		80,000
		To record issuance of 10,000 shares of common stock for cash at $9 per share
7	Nov. 1	Cash	112,000
		Preferred Stock		100,000
		Paid-in Capital in Excess of Pare - Preferred Stock		12,000
		To record issuance of 1,000 shares of preferred stock for cash at $112 per share

Calculation:

Entry #1:

Cash = 80,000 * $5 = 400,000

Common Stock = 80000 * $1 = 80,000

Entry #2:

Cash = 5,000 * $108 = 540,000

Preferred Stock = 5000 * $100 (par) = 500,000

Entry #3:

Common Stock = 24000 * $1 = 24000

Paid-in Capital in Excess of Stated Value—Common Stock = $80,000 - 24,000 = 56,000

Entry #4:

Cash = 80000 * $7 = 560,000

Common Stock = 80000 * $1 = 80,000

Entry #5:

Common Stock = 10000 * $1 = 10,000

Paid-in Capital in Excess of Stated Value—Common Stock = $50,000 - 10,000= 40,000

Entry #6:

Cash = 10000 * $9 = 90,000

Common Stock = 10000 * $1 = 10,000

Entry #7:

Cash = 1000 * $112 = 112,000

Preferred Stock = 1000 * $100 = 100,000