Question

On October 31, Legacy Rocks Inc., a marble contractor, issued for cash 400,000 shares of $10 par common stock at $18, and on November 19, it issued for cash 50,000 shares of preferred stock, $75 par at $80. a. Journalize the entries for October 31 and November 19. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On Oct 31

Cash (400,000 × $18) $7,200,000  

        To Common stock (400,000 × $10)  $4,000,000

         To Paid in capital in excess of par value - common stock  $3,200,000

(Being the issuance of the common stock is recorded)

For recording this we debited the cash as it increased the assets and credited the common stock and paid in capital as it also increased the stockholder equity

On Nov 19

Cash (50,000 × $80) $4,000,000  

          To Preferred stock  (50,000 × $75)  $3,750,000

          To Paid in capital in excess of par value - Preferred stock  $250,000

(Being the issuance of the preferred stock is recorded)

For recording this we debited the cash as it increased the assets and credited the common stock and paid in capital as it also increased the stockholder equity