July 1. Issued 243,000 shares of common stock at par for cash. 1. Issued 600 shares of common stock at par to an attomey in payment of legal fees for organizing the corporation. Aug. 7. Issued 68,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $147,400, $518,700 and $163,500 respectively. Sept. 20. Issued 16,000 shares of preferred stock at $112 for cash. Required: Journalize the transactions. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
Stocks:
Stocks are shares in ownership of the company. It represents the capital raised by a corporation by issuing shares. Stock is evidence of ownership interest and not a loan. There are mainly two types of stocks:
a. Common Stock: Common Stocks are ordinary shares, common stockholders are the owners of the corporation and they enjoy voting rights in board meetings.
b. Preferred Stock: Preferred stock is one kind of ownership that has a preference for the claims of assets and dividends over the common stockholders.
There are certain terms used in accounting for stocks transactions, let us discuss those as per the requirement of the problem:
a. Authorized Stock: It is the maximum number of shares that a corporation is legally permitted to issue as specified in its articles of incorporation.
b. Issued Stock: The issued stock is the total amount of capital stock that has been issued out of authorized stock.
Issuance of Stock:
When a company needs capital it issues shares or stock. Generally, this issuance would be in exchange for cash but it may exchange its stock for non-cash transactions like plant, property, and equipment. Some companies issue different classes of stocks and thus, are said to have a multiple capital structure, which generally differs by voting privileges.
Journal Entries:
1. stock issued at par
Cash A/c Dr. Amount
Preferred/Common Stock A/c Cr. Amount
2. stock issued above par
Cash A/c Dr. Amount
Preferred/Common Stock A/c Cr. Amount
Additional Paid-in Capital-Common/Preferred Stock A/c Cr. Amount
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