Question

Brief Exercise 1o-40 (Algorithmic) Recording the Sale of Common and Preferred Stock At the end of its first year of operations, Mulligan Corporation has outstanding shares of 155,000 common stock and 16,000 preferred stock. The State of Ohio authorized Mulligan to issue 17,000 shares of 6% preferred stock with a par value of $35 per share and 156,000 shares of common stock with a par value of $10 per share. Any preferred stock sold during the year had a selling price of $45.50 per share. Mulligan's common stock was issued at $24. Required: Prepare the journal entry to record the issuance of stock during the year. (Record sale of preferred and common stock)

Answer 1

Solution

General journal	Debit	Credit
Cash	$ 4,517,500.00
Common stock		$ 1,560,000.00
Preferred stock		$      595,000.00
Paid in capital in excess of par-Common stock		$ 2,184,000.00
Paid in capital in excess of par-Preferred stock		$      178,500.00
(To record sale of preferred and common stock)

Working

General journal	Debit	Credit
Cash	=+(17000*45.5)+(156000*24)
Common stock		=156000*10
Preferred stock		=17000*35
Paid in capital in excess of par-Common stock		=156000*14
Paid in capital in excess of par-Preferred stock		=17000*10.5