Recording Stockholders’ Equity Transactions
On-line Learning Corporation obtained a charter at the start of 2011 that authorized 52,000 shares of no-par common stock and 23,000 shares of preferred stock. par value $10. The corporation was organized by four individuals who purchased 16,000 shares of the common stock. The remaining shares were to be sold to other individuals at 537 per share on a cash basis. During 2011, the following selected transactions occurred:
a.Collected $20 per share cash from the four organizers and issued 5,000 shares of common stock to each of them.
b.Sold and issued 6,000 shares of common stock to an out sider at $40 cash per share.
c.Sold and issue d 7,000 shares of preferred stock at $30 cash per share.
Required:
1. Give the journal entries indicated for each of these transactions.
2. Is it ethical to sell stock to outsiders at a higher price than the amount paid by the organizers?
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