Indigo Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.May 2 Cash 112,500 Capital Stock 112,500 (Issued 7,500 shares of $12 par value common stock at $15 per share) 10 Cash 765,000 Capital Stock 765,000 (Issued 15,000 shares of $16 par value preferred stock at $51 per share) 15 Capital Stock 7,900 Cash 7,900 (Purchased 790 shares of common stock for the treasury at $10 per share) On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Stock are of two types that is issued by the company. It can be common stock or preferred stock. Any…

Answered: Indigo Corporation recently hired a new…

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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Indigo Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.

May 2	Cash	112,500
	Capital Stock		112,500
	(Issued 7,500 shares of $12 par value common stock at $15 per share)
10	Cash	765,000
	Capital Stock		765,000
	(Issued 15,000 shares of $16 par value preferred stock at $51 per share)
15	Capital Stock	7,900
	Cash		7,900
	(Purchased 790 shares of common stock for the treasury at $10 per share)

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

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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