Question

Beauty Island Corporation began operations on April 1 by issuing 60,000 shares of $5 par value common stock for cash at $13 per share. On April 19, it issued 2,000 shares of common stock to attorneys in settlement of their bill of $27,500 for organization costs. In addition, Beauty Island issued 1,000 shares of $1 par value preferred stock for $6 cash per share.Journalize the issuance of the common and preferred shares, assuming the shares are not publicly traded. (Record journal entries in the order presented in the problem.)

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Cash  Dr, $780,000

(60,000 × $13)

Common Stock Dr, $300,000

(60,000 × $5)  

       To Paid-in Capital in Excess of par, Common Stock $1,80,000

(Being issuance of 60,000 shares at $13 per share is recorded)

2. Organization costs Dr, $27,500

      To Common Stock $5,000

(1,000 × $5)

        To Paid-in Capital in Excess of par, Common Stock $22,500

(Being issuance of 1,000 shares for attorney's fees is recorded)