Question

On January 29, Quality Marble Inc., a marble contractor, issued for cash 75,000 shares of $10 par common stock at $23, and on May 31, it issued for cash 100,000 shares of $4 par preferred stock at $6. a.Illustrate the effects on the accounts and financial statements of the January 29 and May 31 transactions. b.What is the total amount invested (total paid-in capital) by all stockholders as of May 31?

Answer 1

Answer:

The correct answer for option (a) is shown below, and for option (b) is $2,325,000

Explanation:

According to the scenario, the computation of the given data are as follows:

(a).

Jan 29   Cash  A/c Dr. $1,725,000            (75,000 × $23)

              To, Common stock A/c. $750,000    ( 75,000 × $10)

             To Share in excess of par value A/c $975,000   ( 75,000 × $23-$10)

May 31  Cash  A/c Dr. $600,000    ( 100,000 × $6)

            To, Preferred stock  A/c $400,000  ( 100,000 × $4)

           To, Preferred stock in excess of par value  A/c $200,000 ( 100,000 × $6 - $4)

(b). Total amount invested = $1,725,000 + $600,000

= $2,325,000