Global Air Inc. recently hired a new accountant with limitedreal-world experience in corporate accounting. Prior to starting the new job, the accountant was very busy and was unable to reviewany texts on corporation accounting. During the first month, he made the following entries for the corporation’s capital stock: Oct. 5 Cash 39,000 Capital Stock 1,000 Gain on Sale of Stock 38,000 (Issued 1,000 shares of $1 par value common stock at $39 per share) 12 Cash 330,000 Capital Stock 330,000 (Issued 3,000 shares of $100 par value preferred stock at $110 per share) 13 Capital Stock 20,000 Cash 20,000 (Purchased 500 shares of common stock for the treasury at $40 per share) 26 Cash 22,500 Capital Stock 500 Gain on Sale of Stock 22,000 (Sold 500 shares of treasury stock at $45 per share) On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

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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Global Air Inc. recently hired a new accountant with limited
real-world experience in corporate accounting. Prior to starting the new job, the accountant was very busy and was unable to review
any texts on corporation accounting. During the first month, he made the following entries for the corporation’s capital stock:

Oct. 5

Cash 39,000

Capital Stock 1,000

Gain on Sale of Stock 38,000

(Issued 1,000 shares of $1 par value common stock at $39 per share)

Cash 330,000

Capital Stock 330,000

(Issued 3,000 shares of $100 par value preferred stock at $110 per share)

Capital Stock 20,000

Cash 20,000

(Purchased 500 shares of common stock for the treasury at $40 per share)

Cash 22,500

Capital Stock 500

Gain on Sale of Stock 22,000

(Sold 500 shares of treasury stock at $45 per share)

On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

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