Answer:
Explanation:
The journal entries are shown below:
1. Cash A/c Dr $35,000
To Common Stock $20,000 (4,000 shares × $5)
To Additional Paid-in Capital in excess of par - Common Stock $15,000
(Being the issuance of stock is recorded and the remaining balance is credited to the additional paid-in capital account)
2. Promotion expenses A/c Dr $40,000
To Common Stock $2,000 (2,000 shares × $1)
To Additional Paid-in Capital in excess of par - Common Stock $15,000
(Being the issuance of stock is recorded to promoters and the remaining balance is credited to the additional paid-in capital account)
3. Promotion expenses A/c Dr $40,000
To Common Stock $40,000
(Being the shares are issued to promoters)
4. Cash A/c Dr $60,000
To Preferred Stock $50,000 (1,000 shares × $50)
To Additional Paid-in Capital in excess of par - Preferred Stock $10,000
(Being the issuance of stock is recorded and the remaining balance is credited to the additional paid-in capital account)
