Question

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 50,000 shares of preferred 2% stock, $60 par and 1,000,000 shares of $8 par common stock. The following selected transactions were completed during the first year of operations:
1. Journalize the transactions. If an amount box does not require an entry, leave it blank.
a. Feb. 5. Issued 700,000 shares of common stock at par for cash.
b. Feb. 5. Issued 1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
c. Apr. 9. Issued 40,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $120,000, $280,000, and $80,000, respectively.
d. June 14. Issued 25,000 shares of preferred stock at $82 for cash.

Answer 1

Answer:

The Journal entries are detailed in the explanation

Feb 5: Debit Cash a/c and credit common stock with $5,600,000

          Debit Legal fees and credit common stock with $9,600

April 9: Debit Land 120,000, building 280,000 and equipment 80,000 and credit common stock $320,000 and excess capital $160,000

June 14: Debit cash $2,050,000 credit Pref stock with $1,500,000 and excess capital with $550,000

Explanation:

The question is to journalize the transactions of Professional Products inc as follows

Date                 Particulars/Description                Debit                Credit

5th Feb             Cash A/c                                   5,600,000

                          Common Stock                                                   5,600,000

Being the issue of 700,000 shares of common stock at par for cash

5th Feb             Legal Fees A/c                          9,600

                          Common Stock                                                   9,600

Being the issue of 1200 shares of common stock at par for legal fees

9th April             Land A/c                                   120,000

                           Building A/c                              280,000

                          Equipment A/c                          80,000

                          Common Stock (40,000 x 8 )                       320,000

                          Capital Paid in Excess of Par                        160,000

Being the issue of 40,000 shares in exchange for land, building and equipment.

14th June             Cash A/c                                   2,050,000

                          2% Preferred Stock ($60 x 45,000)                    1,500,000

                         Pref. Capital Paid in Excess of Par                        550,000

Being the issuance of 25,000 shares of Preferred stock at $82