Answer:
(a) Journalize the transactions, assuming that the common stock has a par value of $5 per share
Debit Credit
Cash 150,000
Common Stock 150,000
Cash 420,000
Common stock 300,000
Additional Paid in Capital 120,000
The first entry we debit cash for 150,000 because 30,000 shares are sold at $5 so 30,000* 5= $150,000 and we credit common stock by 150,000 because the par value of the shares are 5 per share and 30,000*5= $150,000. Because the price and par value are the same there is no additional paid in capital
In the second Entry we debit cash for 420,000 because 60,000 shares are sold for $7 and 60,000*7= 420,000. We credit common stock by 300,000 because par value of share is $5 and 5*60,000 = 300,000. We Credit additional paid in capital by 120,000 because that is the difference between the par value of the shares and price of shares. (7-5)* 60,000= 2*60,000= 120,000
(b) Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share.
Debit Credit
Cash 150,000
Common Stock 30,000
Additional Paid in Capital 120,000
Cash 420,000
Common stock 60,000
Additional Paid in Capital 360,000
In the first entry we debit cash for 150,000 because 30,000 shares are sold at $5 so 30,000* 5= $150,000 and we credit common stock by 30,000 because the stated value of the stock per share is $1 and 1*30,000 = 30,000. We credit additional paid in capital by 120,000 because the difference between the price of the stock and stated value of the stock is 120,000. (5-1)*30,000= 4*30,000= 120,000
In the second Entry we debit cash for 420,000 because 60,000 shares are sold for $7 and 60,000*7= 420,000. We credit common stock by 60,000 because the stated value of the stock per share is $1 and 1*60,000 = 60,000 and we credit additional paid in capital by 360,000 because that is the difference between the price of the stock and stated value of the stock.
(7-1)*60,000=6*60,000= 360,000
Explanation:
