Question

The following is a news item reported by Reuters: WASHINGTON, Jan 29 (Reuters)-Knowlton Medical Group, a maker of reconstructive implants for knees and hips, on Tuesday filed to sell 3 million shares of common stock. In a filing with the U.S. Securities and Exchange Commission, it said it plans to use the proceeds from the offering for general corporate purposes, working capital, research and development, and acquisitions. After the sale there will be about 36.0 million shares outstanding in the Arlington, Tennessee-based company, according to the SEC filing. Knowlton shares closed at $17.60 on Nasdaq. The common stock of knowlton Medical Group has a par of $0.02 per share. Required: Prepare the journal entry to record the sale of the shares assuming the price existing when the announcement was made and ignoring share issue costs. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet Record the issuance of the new stock. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal

Answer 1

Answer:

Event	General journal	Debit ($)	Credit ($)
1	Cash	52,800,000
	common stock		60,000
	paid in capital - excess of par		52,740,000
	(To record the sale of 3 million common stock shares $0.02 & $17.60)

Working Notes:
Calculation of paid in capital in excess of common stock:
No of shares sold = 3000000
Par value per share = $0.03 per share
Total common stock at par value= 3000000 x 0.02 = $60000
Sale proceeds = 3000000 x $17.60 per share = $52800000
(-) Common stock of par value = ($60000)
Paid in capital in excess of par of common stock = $52,740,000