Question

Flint Inc. 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. Credit 252,000 960,000 Date Account Titles and Explanation Debit May 2 Cash 252,000 Capital Stock (Issued 14,000 shares of $5 par value common stock at $18 per share) May 10 Cash 960,000 Capital Stock (Issued 12,000 shares of $40 par value preferred stock at $80 per share) May 15 Capital Stock 12,600 Cash (Purchased 900 shares of common stock for the treasury at $14 per share) May 31 Cash 11,520 Capital Stock Gain on Sale of Stock (Sold 720 shares of treasury stock at $16 per share) 12,600 7,200 4,320 On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer:

Journal Entries:

Date	Account title and Explanation	Debit	Credit
May 2	Cash [$14,000 x $18]	$252,000
	Common stock [14,000 x $5 par]		$70,000
	Paid-in capital in excess of par-Common		$182,000
	[To record issuance of common stock]
May 10	Cash [12,000 x $80]	$960,000
	Preferred stock [12,000 x $40 par value]		$480,000
	Paid-in capital in excess of par-Preferred		$480,000
	[To record issuance of preferred stock]
May 15	Treasury stock [900 x $14 cost]	$12,600
	Cash		$12,600
	[To record purchase of own shares]
May 31	Cash [720 x $16]	$11,520
	Treasury stock [720 x $14 cost]		$10,080
	Paid-in capital in excess from treasury stock		$1,440
	[To record sale of treasury stock]