Question

Ch 13: Homework Question 3 of 4 -/15 Ayayai Corporation is authorized to issue both preferred and common stock. The par value of the preferred is $49. During the first year of operations, the company had the following events and transactions pertaining to its preferred stock. Feb. 1 Issued 18,500 shares for cash at $59 per share. July Issued 12,000 shares for cash at $63 per share. 1 (a) Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit

Answer 1

Journal

Date	Account title	Debit	Credit
Feb. 1	Cash	1,091,500
	Preferred stock		906,500
	Paid in capital in excess of par value- Preferred stock		185,000
July 1	Cash	756,000
	Preferred stock		588,000
	Paid in capital in excess of par value- Preferred stock		168,000

For Feb. 1

Cash will be debited by = Number of Preferred shares issued x Issue price per Preferred share

= 18,500 x 59

= $1,091,500

Preferred stock will be credited by = Number of Preferred shares issued x Par value per Preferred share

= 18,500 x 49

= $906,500

Additional paid in capital - Preferred stock will be credited by = Number of Preferred shares issued x (Issue price per Preferred share - Par value per Preferred share)

= 18,500 x (59 - 49)

= $185,000

For July 1

Cash will be debited by = Number of Preferred shares issued x Issue price per Preferred share

= 12,000 x 63

= $756,000

Preferred stock will be credited by = Number of Preferred shares issued x Par value per Preferred share

= 12,000 x 49

= $588,000

Additional paid in capital - Preferred stock will be credited by = Number of Preferred shares issued x (Issue price per Preferred share - Par value per Preferred share)

= 12,000 x (63 - 49)

= $168,000

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