Question

On-Line Learning Corporation obtained a charter at the beginning of this year that authorized 71,000 shares of no-par common stock and 38,000 shares of preferred stock. $19 par value. The corporation was organized by four individuals who purchased a total of 44,000 shares of the common stock. The remaining shares were to be sold to other individuals. During the year, the following selected transactions occurred: a. Collected $38 cash per share from the four organizers and issued 11,000 shares of common stock to each of them. b. Sold 12,000 shares of common stock to an outsider at $76 cash per share. c. Sold 13,000 shares of preferred stock at $57 cash per share. Required: 1. Prepare the journal entries for each of these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet < 1 2 3 > Collected $38 cash per share from the four organizers and issued 11,000 shares of common stock to each of them. Note: Enter debits before credits. Transaction General Journal Debit Credit a

Answer 1

Requirement 1:

	Account title and explanation	Debit	Credit
1	Cash [11,000 x 4 x $38]	$1,672,000
	Common stock		$1,672,000
	[To record issuance of no-par common stock]
2	Cash [12,000 x $76]	$912,000
	Common stock		$912,000
	[To record issuance of common stock to outsiders]
3	Cash [13,000 x $57]	$741,000
	Preferred stock [13,000 x $19 par]		$247,000
	Paid-in capital in excess of par-preferred		$494,000
	[To record issuance of preferred stock]

Requirement 2:

Yes

Explanation:

Organizers are promoters of the company. It is ethical to issue a stock at lower price as it is favor to the promoter for their initiatives.