Question

E11-5 Mesa Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the 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

Solution :-

Date	Account Titles and Explanation	Debit	Credit
May - 02	Cash	$104,000
	Common stock [ 8,000 shares * $10 ]		$80,000
	Paid - in - capital [ $104,000 - $24,000 ]		$24,000
May - 10	Cash	$530,000
	Preferred stock [ 10,000 shares * $20 ]		$200,000
	Paid - in - capital [ $530,000 - $200,000 ]		$330,000
May - 15	Treasury stock	$7,200
	Cash		$7,200