Question

Ivanhoe 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.

Date	Account Titles and Explanation	Debit	Credit
May 2	Cash	204,000
	Capital Stock		204,000
	(Issued 12,000 shares of $5 par value common stock at $17 per share)
May 10	Cash	800,000
	Capital Stock		800,000
	(Issued 10,000 shares of $40 par value preferred stock at $80 per share)
May 15	Capital Stock	14,400
	Cash		14,400
	(Purchased 900 shares of common stock for the treasury at $16 per share)
May 31	Cash	11,200
	Capital Stock		5,600
	Gain on Sale of Stock		5,600
	(Sold 560 shares of treasury stock at $20 per share)

On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Answer 1

On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Date	account and explanation	debit	credit
May 2	Cash (12000*17)	204000
	Common Stock		60000
	Paid in capital in excess of par value-Common Stock		144000
	(To record common stock)
May 10	Cash	800000
	Preferred stock		400000
	Paid in capital in excess of par value-preferred Stock		400000
	(To record preferred stock)
May 15	Treasury Stock	14400
	Cash		14400
	(To record purchase treasury stock)
May 31	Cash	11200
	Treasury stock		8960
	Paid in capital from sale of treasury stock		2240
	(To record sale of treasury stock)