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Question 1E

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Intermediate Accounting (Kieso)
Found in: Page 812

Short Answer

(Recording the Issuances of Common Stock) During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.

Jan. 10 Issued 80,000 shares for cash at $6 per share.

Mar. 1 Issued 5,000 shares to attorneys in payment of a bill for

$35,000 for services rendered in helping the company to

incorporate.

July 1 Issued 30,000 shares for cash at $8 per share.

Sept. 1 Issued 60,000 shares for cash at $10 per share.

Instructions

  1. Prepare the journal entries for these transactions, assuming that the common stock has a par value of $5 per share.
  2. Prepare the journal entries for these transactions, assuming that the common stock is no-par with a stated value of $3 per share.

Issuing a share requires a company to pass a journal entry such that the cash account is debited and the common stock account is credited.

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Step by Step Solution

Meaning of Shares

Shares are regarded as one of the finest long-term investments, outperforming property, corporate bonds, government bonds, and other asset classes. This helps the investor for investing their money in the long term.

Preparing Journal Entries assuming that the Common Stock has a par value of $5 per share.

Date

Particular

Folio

Debit $

Credit $

January 10

Cash A/c

480,000

Common stock

400,000

Paid-in Capital in excess of par

Common stock A/c

80,000

To record the issue of share.

March 1

Organizational Expense A/c

35,000

Common stock

25,000

Paid-in Capital in excess of par

Common stock A/c.

10,000

To record the issue of share.

July 1

Cash A/c.

240,000

Common stock

150,000

Paid-in Capital in excess of par

Common stock A/c.

90,000

To record the issue of share.

September 1

Cash A/c.

600,000

Common stock

300,000

Paid-in Capital in excess of par

Common stock A/c.

300,000

To record the issue of share.

Preparing Journal Entries assuming that the Common Stock is no-par with a stated value of $3 per share.

Date

Particular

Folio

Debit $

Credit $

January 10

Cash A/c.

480,000

Common stock

240,000

Paid-in Capital in excess of par

Common stock A/c.

240,000

To record the issue of share.

March 1

Organizational Expense A/c

35,000

To Common stock

15,000

To Paid-in Capital in excess of stated

Value Common stock A/c

20,000

To record the issue of share.

July 1

Cash A/c

240,000

Common stock

90,000

Paid-in Capital in excess of stated

value common stock A/c

150,000

To record the issue of share.

September 1

Cash A/c

600,000

Common stock

180,000

Paid-in Capital in excess of stated

value -Common stock A/c

420,000

To record the issue of share.

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