Question

Mesa Corp recently hired a new a

E11-5 Mesa Corporation recently hired a new accountant with extensive experience in Prepare comect entries for cap accounting for partnerships. Because of the pressure of the new job, the accountant was stock transactions unable to review what he had learned earlier about corporation accounting. During the (0 2), A first month, he made the following entries for the corporation's capital stock. May 2 Cash 104,000 Capital Stock 104,000 (Issued 8,000 shares of $10 par value common stock at $13 per share 10 Cash 530,000 Capital Stock 530,000 (Issued 10,000 shares of $20 par value preferred stock at $53 per share) 15 Capital Stock 7,200 Cash 7.200 (Purchased 600 shares of common stock for the treasury at $12 per share) Instructions On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Answer 1

As per the Narration given for the Journal Entries above, the Correct Journal Entries to be passed are as shown below:

May 2 Cash / Bank A/c Dr $104,000

To Common Capital Stock A/c $ 80,000

To Additional Paid in Capital A/c $ 24,000

(Being 8,000 shares of $10 par value are issued at $13 per share)

May 10 Cash / Bank A/c Dr $530,000

To Preffered Capital Stock A/c $ 200,000

To Additional Paid in Capital A/c $ 330,000

(Being 10000 shares of 20 par value of preffered stock issued at $53 per share)

May 15 Common capital Stock A/c Dr $ 6,000

Additional Paid in capital A/c Dr $ 1,200

To Bank / Cash A/c $ 7,200

( Purchased 600 shares of $10 par value of common stock at $ 12 for treasury)

Note: In case of time gap between the buy back of shares and payment of shares due entry and payment entry need to be passed.

The loss on buy back of shares can be adjusted against the Additional Paid in Capital.