Question

Prepare the issuer's journal entry for each of the following separate transactions.

Answer 1

Answer:

a.

March 1

Debit  : Cash $318,500

Credit : Common Stock $198,000

Credit : Excess of Par $120,500

Being Issue of Par value Shares for $318,500 cash

b.

April 1

Debit  : Cash $84,000

Credit : Common Stock $84,000

Being Issue of no Par value shares for $84,000 cash

c.

April 6

Debit  : Inventory $53,000

Debit : Note Receivable $103,000

Credit : Common Stock $68,000

Credit : Excess of Par $88,000

Being Issue of Par value Shares for Inventory and Note Receivable

Explanation:

Note: We are instructed to prepare journals from the issuer`s point of view and this needs to be followed.

When shares are issued, the Common Stock increases :

a. For par value Common Stocks, any price paid in excess of par value is accounted in Excess of Par Reserve.

b. For no par value shares, there is no Excess of Par Reserve, we simply record the increase in Common Stock at the price paid for.