Question

Prepare journal entries to record the following four separate issuances of stock. A corporation issued 10,000 shares of $20 par value common stock for $240,000 cash. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $36,000. The stock has a $1 per share stated value. A corporation issued 5,000 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $36,000. The stock has no stated value. A corporation issued 2,500 shares of $25 par value preferred stock for $98,500 cash.

Answer 1

Answer: Please see explanation column for answers

Explanation:

Accounts and explanation           Debit                     Credit

1                    Cash                  $240,000  

Common Stock (10,000 X 20)                                      $200,000

Paid in Excess of Par- Common Stock

($240,000- 200,000)                                                    $ 40,000

(Being common shares issued for cash)  

2. Organisation  Expenses                $36,000

Common Stock (5000x1)                                                   $5000

Paid in Excess of Par- Common Stock = 36,000-5000  $31,000

(Being common shares issued to promoters)  

3 Organisation  Expenses           $36,000    

      Common Stock                                                         $36000

Since There is no stated value,  paid in excess of par will not be calculated 

4 Cash                                         $98,500  

Preferred Stock (2500 x 25)                                             $62,500

Paid in Excess of Par- Preferred Stock

(98,500- 62,500)                                                               $36,000

(Being preferred shares issued for cash)