Question

Eastport Inc. was organized on June 5, 2018. It was authorized to issue 300,000 shares of $10 par common stock and 50,000 shares of 5 percent cumulative class A preferred stock. The class A stock had a stated value of $50 per share. The following stock transactions pertain to Eastport Inc.: Issued 15,000 shares of common stock for $12 per share. Issued 5,000 shares of the class A preferred stock for $51 per share. Issued 60,000 shares of common stock for $15 per share. Prepare general journal entries for these transaction.

Answer 1

Answer:

A) Cash (debit) 180,000; Common stock (credit) 150,000; Additional paid-up capital-common stock (credit) 30,000 - Debit - Credit = 0

B) Cash (debit) 255,000; Preferred stock (credit) 250,000; Additional paid-up capital-preferred stock (credit) 5,000 - Debit - Credit = 0

C) Cash (debit) 900,000; Common stock (credit) 600,000; Additional paid-up capital-common stock (credit) 300,000 - Debit - Credit = 0

Explanation:

In Eastport Inc.´s case all 3 situations are similar, shares (Stockholders´Equity) increased, so credits in 4 accounts, according to the type of shares that are issued, must be registered: Common stock, Preferred stock, Additional paid-up capital-common stock, Additional paid-up capital- preferred stock. We will recognize the par value and stated value of the shares and the difference between this and the price paid by shareholders will be recognized as additional paid-up capital. Also, cash (Asset) is received as payment for the shares so a debit must be registered in the account Cash.

Answer 2

Answer:

                                       Eastport Inc.

General Journal for the Period Ended June 30, 2018                

                                                                  DR                          CR    

                                                                   $                              $    

Date                       Descriptions                                                       (1) June x, 2018        Bank                        180,000                          

        Common Stock                                                          150,000

Additional paid-up capital-common stock                        30,000

Being 15,000 units of common stock issued at $12 per share.                                                                                                                  

(2) June xx, 2018             Bank             255,000                          

Class A cumulative Preferred Stock                                250,000

Additional paid-up capital- Class A Preferred Stock           5,000

Being 5,000 units of Class A cumulative preferred stock issued at $51 per share                                                                                

(3) June xxx, 2018          Bank              900,000                            

Common Stock                                                                600,000

Additional paid-up capital-common stock                      300,000

Being 60,000 units of common stock issued at $15 per share.                                                                                                            

Explanation:

When shares are issued, cash is received into Bank account. This implies that Bank account is debited and common stock  or class of share issued is credited.

• Authorized common stock is 300,000 units at $10. Any issue sold above $10 will be credited to additional paid-up capital.
• Authorized 5% cumulative class A preferred stock is 50,000 at $50. Any issue sold above $50 will be credited to additional paid-up capital.
• Above authorized prices are called par value.