Question

Rodriguez Corporation issues 6,000 shares of its common stock for $96,000 cash on February 20. Prepare journal entries to record this event under each of the following separate situations. 1. The stock has a $14 par value. 2. The stock has neither par or stated value. 3. The stock has a $7 stated value.

Answer 1

Answer:

The answers are given below;

Explanation:

The journal entries under each of following scenario are prepared as follows;

1. Cash         Dr.$96,000

   Common Stocks(6000*14)     Cr.$84,000

  Paid in capital in excess of par (96,000-84,000) Cr.$12,000

2.   Cash Dr. $96,000

      Common Stocks  Cr.$96,000

3. Cash    Dr.$96,000

  Common Stocks (7*6000)    Cr.$42,000

  Paid in capital in excess of par (96,000-42,000) Cr.$54,000

When there is no stated or par value,the entire amount of funds raised are credited in common stocks.

Answer 2

Answer:

Journal entries for issue for cash proceeds of $96,000

Dr Cash                                                                                    $96,000

Cr Common stock par value($14*6000)                                                 $84,000

Cr Paid-in capital in excess of par value($96,000-$84,000)                $12,000

The journal entries with neither par or stated value

Dr Cash                                                                                  $96,000

Cr Common stock with neither par or stated value                            $96,000

Journal entries  when stated value is $7

Dr Cash                                                                                 $96,000

Cr Common stock at stated value of $7($7*6000)                           $42,000

Cr Paid-in capital in excess of stated value($96,000-$42,000)      $52,000

Explanation:

Cash is debited in all cases as the more cash was received,an increase in asset is normally debited to the relevant asset account.

Common stock and paid-in capital in excess par were credited because they shows the increase in amount owed by the business to their owners.