Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,200,000 shares of common stock with a par of $1. The following transactions affecting stockholders’ equity were completed during the first year of operations: Jan. 2 Issued 114,000 shares of stock at par to Paul Glenn for cash. 5 Issued 3,400 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation and issued 42,500 shares of stock at par to Michele Kirby for cash. (record as two separate transactions.) 8 Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for $189,900 for 20 years at 6%, and there is accrued interest of $5,200 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $64,600 and the building at $224,100 and that Gretchen Northway’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest. Required: Journalize the entries to record the transactions. Refer to the chart of accounts for the exact wording of the account titles.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Selected stock transactions

Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,200,000 shares of common stock with a par of $1.

The following transactions affecting stockholders’ equity were completed during the first year of operations:

Jan.	2	Issued 114,000 shares of stock at par to Paul Glenn for cash.
	5	Issued 3,400 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation and issued 42,500 shares of stock at par to Michele Kirby for cash. (record as two separate transactions.)
	8	Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for $189,900 for 20 years at 6%, and there is accrued interest of $5,200 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $64,600 and the building at $224,100 and that Gretchen Northway’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.

Required:

Journalize the entries to record the transactions. Refer to the chart of accounts for the exact wording of the account titles.

CHART OF ACCOUNTS

Alpha Sounds Corp.

General Ledger

ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
191	Building
192	Accumulated Depreciation-Building

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
515	Credit Card Expense
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Selling Expenses
534	Rent Expense
535	Insurance Expense
536	Office Supplies Expense
537	Organizational Expenses
561	Depreciation Expense-Building
590	Miscellaneous Expense
710	Interest Expense

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11

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