Question

Issuing Stock Work Place Products Inc., a wholesaler of office products, was organized on July 1 of the current year, with an authorization of 125,000 shares of 3% preferred stock, $60 par and 650,000 shares of $15 par common stock. The following selected transactions were completed during the first year of operations: Journalize the transactions. July. 1. Issued 120,000 shares of common stock at par for cash. July 1 July. 1 Issued 400 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation. July 1 Aug. 7. Issued 23,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $63,000, $343,000, and $77,000, respectively For a compound transaction, if an amount box does not require an entry, leave it blank. Aug. 7 Net

Answer 1

Both common stock & preferred stock are a part of equity of a company. The main difference between them is that preferred stock does not come with voting rights while common stock usually have voting rights& preferred stock have more rights over the income of the company as compared to common stock. Both can be issued at par value or at a rate higher than the par value as is the case in the given ques. The journal entries are given in the images attached.

Journal Entries Date Particulars Debit Credit Julyl Cash ale DY, 18,00,000 To Common Stockale 18,00,000 C1,20,000 x 15) July Organisational Expenses ole by 6000 To Common Stock ale 6ooo C 400x15) Aug 7 Land alc Dr. 63000 Building als Dr. 3,43,000 Equiprtient alo Dr. 27,000 (23000x15) To Common stockal 3,45,000 To Paid in capital in 138,000 Excess of par- Common Stock Sep20 Bashala (33000X 72) Dr. 23,76000 (33000x 6To Preferred stock ale 19,80,000 To paid in capital in 396000 Excess of par - preferred stod 1633000x13) 910 ) Auga 5 paid to capital cin excess of par-common (63000+ 343000+77000)- 34500 o 483000 - 345000 1,38000.