Answer:
a) Journal Entries for 2017: Magna Highend Vehicles
October 3, 2017:
Debit Building with $800,000
Credit Preferred Stock with $750,000
Credit Share Premium (Preferred Stock) with $50,000
Being issue of 15,000 preferred stock in exchange for building.
November 8, 2017:
Debit Cash with $350,000
Credit Preferred Stock with $250,000
Credit Share Premium (Preferred Stock) with $100,000
Being issue of 5,000 preferred stock in cash at $70 per share.
December 3, 2017:
Debit Cash with $750,000
Credit Common Stock with $25,000
Credit Share Premium with $725,000
Being issue of 50,000 common stock at $15 per share.
b) 2016 Journal Entries for QC Delila Catering:
March 1, 2016:
Debit Cash with $270,000
Credit Stock with $270,000
Being issue of 15,000 shares at $18 per share.
April 15, 2016:
Debit Legal Fee with $6,500
Debit Stock Discount with $43,500
Credit Stock with $50,000
Being issue of 5,000 shares worth $10 per share in settlement of a legal fee.
June 10, 2016:
Debit Cash with $550,000
Credit Stock with $550,000
Being issue of 25,000 shares at $22 per share.
Explanation:
Shares at be issued in exchange for cash or other assets, and even in settlement of a liability.
Some shares are issued at a discount while some are issued at a premium or at par. A share issued at a discount means that the stock was sold for less than its market value or par value. For example, the issue of stock worth $50,000 in settlement of a legal fee of $6,500.
Shares issued at a premium are sold for more than their par values. The par value of a stock is the stated nominal value as against the market price. Usually, if a stock is doing well in the market, the market price is more than the par value.
