Question

Todd Corporation sold 4 million of its $1 par common shares at $6 per share. The company received net proceeds from the public offering of $23,600,000, after deducting legal, promotional, and accounting services necessary to effect the sale. Prepare the appropriate journal entry for the sale of the stock. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

The journal entry for sale of the stock is shown below:

Explanation:

Cash A/c................................................................................Dr       $23,600,000

      Common Stock A/c....................................................................Cr     $4,000,000

      Paid in Capital in Excess of Par: Common Stock A/c.........Cr    $19,600,000

As the common stock are issued.

Stock Issue Expense A/c............Dr    $4,000,000

          Cash A/c...................................Cr   $4,000,000

As stock issue expense is incurred.

Working Note:

Common Stock = Number of stock sold × Par Value

= 4,000,000 × $1

= $4,000,000

Paid in Capital in Excess of Par: Common Stock = Amount received - Common Stock

= $23,600,000 - $4,000,000

= $19,600,000