Exercise 15-08Ivanhoe Inc. 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.DateAccount Titles and ExplanationDebitCreditMay 2Cash224,000 Capital Stock 224,000 (Issued 14,000 shares of $5 par value common stock at $16 per share) May 10Cash960,000 Capital Stock 960,000 (Issued 12,000 shares of $40 par value preferred stock at $80 per share) May 15Capital Stock12,000 Cash 12,000 (Purchased 800 shares of common stock for the treasury at $15 per share) May 31Cash9,180 Capital Stock 5,400 Gain on Sale of Stock 3,780 (Sold 540 shares of treasury stock at $17 per share) On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms.…

Answered: On the basis of the explanation for…

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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Exercise 15-08

Ivanhoe Inc. 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.

Date	Account Titles and Explanation	Debit	Credit
May 2	Cash	224,000
	Capital Stock		224,000
	(Issued 14,000 shares of $5 par value common stock at $16 per share)
May 10	Cash	960,000
	Capital Stock		960,000
	(Issued 12,000 shares of $40 par value preferred stock at $80 per share)
May 15	Capital Stock	12,000
	Cash		12,000
	(Purchased 800 shares of common stock for the treasury at $15 per share)
May 31	Cash	9,180
	Capital Stock		5,400
	Gain on Sale of Stock		3,780
	(Sold 540 shares of treasury stock at $17 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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