Question

Willow Creek Nursery, with an authorization of 72,000 shares of preferred stock and 210,000 shares of common stock, completed several transactions involving its stock on October 1, the first day of operations. The trial balance at the close of the day follows Willow Creek Nursery
UNADJUSTED TRIAL BALANCE

October 1, 20--

ACCOUNT TITLE

DEBIT

CREDIT

1

Cash

4,000,500.00

2

Land

860,000.00

3

Buildings

2,533,000.00

4

Common Stock

2,540,000.00

5

Paid-In Capital in Excess of Par-Common Stock

1,460,500.00

6

Preferred Stock

2,925,000.00

7

Paid-In Capital in Excess of Par-Preferred Stock

468,000.00

8

Totals

7,393,500.00

7,393,500.00

Common stock has a $20 par value and the preferred stock is 1%, 75 par value. All shares within each class of stock were sold at the same price. The preferred stock was issued in exchange for the land and buildings.

Journalize the two entries to record the transactions summarized in the trial balance.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

1. Cash A/c Dr $4,000,500

         To Common stock $2,540,000

         To Paid-In Capital in Excess of Par-Common Stock  $1,460,500

(Being issuance of the common stock is recorded)

2. Land A/c Dr $860,000

   Building A/c Dr $2,533,000

        To Preferred Stock  $2,925,000

        To Paid-In Capital in Excess of Par-Preferred Stock  $468,000

(Being issuance of the preferred stock is recorded)

All other information which is given is not relevant. Hence, ignored it