Question

Indigo Corporation 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. May 2 Cash 112,500 Capital Stock 112,500 (Issued 7,500 shares of $12 par value common stock at $15 per share) 10 Cash 765,000 Capital Stock 765,000 (Issued 15,000 shares of $16 par value preferred stock at $51 per share) 15 Capital Stock 7,900 Cash 7,900 (Purchased 790 shares of common stock for the treasury at $10 per share) On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock 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. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Journal Entries :

Date	Particulars	L F	Debit	Credit
May 2	Cash		$1,12,500
	To Capital Stock			$90,000
	To Paid- in excess of par value - Capital stock			$22,500
	To record the issuance of 7,500 shares for cash
May 10	Cash		$7,65,000
	To Capital Stock			$2,40,000
	To Paid- in excess of Par value - Capital stock			$5,25,000
	To record the issuance of 15,000 shares for cash.
May 15	Capital Stock		$7,900
	To Cash			$7,900
	To record the purchase of common stock.