Question

Franklin Corporation was authorized to issue 5,000 shares of $100 par value, 9% preferred stock and 50,000 share of $5 par common stock. Record the following transactions:

• Issued 10,000 shares of common stock for $12 per share
• Issued 500 shares of common stock at $11 per share for services rendered in connection with the organization of the company
• Issued 2,500 shares of common stock for land on which the asking price was $35,000. Market value of the stock was $12. Management wishes to record the land at the market price of the stock.
• Declared a cash dividend of $.50 per share on the common stock
• Date of record
• Paid the cash dividend
• Issued 1,000 shares of Preferred stock at $110 per share

Answer 1

Solution:
	Journal Entries
	Sr. No.	Date	Account Title and explanation	Debit	Credit
	1	-----	Cash (10,000 Shares X $ 12)	$1,20,000
			Common Stock (10,000 Shares X $ 5)		$50,000
			Paid in Capital in excess of par - Common Stock		$70,000
			(Record the issue of Common stock)
	2	-----	Goodwill (500 Shares X $ 11)	$5,500
			Common Stock (500 Shares X $ 5)		$2,500
			Paid in Capital in excess of par - Common Stock		$3,000
			(Record the issue of Common stock to prmoters)
	3	-----	Land	$35,000
			Common Stock (2,500 Shares X $ 5)		$12,500
			Paid in Capital in excess of par - Common Stock		$22,500
			(Record the issue of Common stock for Land)
			Retained Earnings (13,000 Shares X $ 0.50)	$6,500
	4	-----	Dividend Payable		$6,500
			(To Declares the cash Dividend)
			Note: 10,000 + 500+2,500 = 13,000 Shares
	5	-----	"No Journal entry is required for Dividend record date"
			Dividend Payable	$6,500
	6	-----	Cash		$6,500
			(To Record the payment of dividend in cash)
			Cash(1000 X $ 110)	$1,10,000
	7	-----	Preferred Stock(1000 Shares X $ 100)		$1,00,000
			Paid in Capital in excess of par - Preferred Stock		$10,000
			(Record the issue of Preferred stock)