Question

Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred: a. Collected $39 cash per share from four individuals and issued 4,900 shares of common stock to each. b. Issued 5,900 shares of common stock to an outside investor at $39 cash per share. c. Issued 7,900 shares of preferred stock at $21 cash per share.

Answer 1

Answer:

The requirement of question is to prepare journal entries for each transaction and prepare stockholder's equity section of balance sheet;The net income for the year is $35,000.No dividends were declared or paid during the year.

Explanation:

a.Cash  4,900*4*39   Dr.$764,400

Common Stocks     Cr.$764,400

b. Cash  5,900*39    Dr.$230,100

   Common Stocks    Cr.$230,100

c. Cash 7,900*21         Dr.$165,900

   Preferred stocks 7,900*10  Cr.$79,000

Paid in capital in excess of par 7,900*(21-10) Cr.$86,900

Extracts from Balance Sheet

Common Stocks (764,400+230,100)   $994,500

Preferred Stocks                                    $79,000

Paid in Capital in excess of par            $86,900

Retained Earnings                                 $35,000

Total                                                        $1,195,400