Question

Prepare the issuer's journal entry for each of the following separate transactions.

Answer 1

Answer:

See the explanation section

Explanation:

1. March 1

Debit  Cash  $318,500

Credit Common Stock (49,500 x $4 par value) = $198,000

Credit Additional paid-in capital                             $120,500

Since, the company issues 49,500 shares with an excess of par value, an additional paid-in capital account will be a credit. It can be calculated = $(318,500 - 198,000) or, [$(318,500/49,500) - $4]*49,500.

In both the cases, the additional capital is $120,500.

2. April 1

Debit  Cash  $84,000

Credit Common Stock $84,000

There will be no additional capital as the firm issues the same number of stock with no-par value.

3. April 6

Debit  Inventory          $53,000

Debit  Machinery        $150,000

Credit Note payable                              $103,000

Credit Common Stock (3,400 x $20)    $68,000

Credit Additional paid-in capital            $32,000

Since the company issues common stock for inventory and machinery, those should be debited. The company also accepts a notes payable to issue the common stock so that the note payable is credit. And the balancing amount will be additional paid-in capital.