Prepare the journal entries for given transaction.

Question

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Answer 1

Question

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)

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Answer 2

Question

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)

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Answer 3

Question

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)

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Answer 4

Question

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)

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Answer 5

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)

Answer 6

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)

Answer 7

Chapter 11, Problem 11.2AP

To determine

Prepare the journal entries for given transaction.

Answer 8

Expert Solution & Answer

Explanation of Solution

Common stock:

These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Par value:

It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Journal:

Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Journal entries for given transaction are as follows:

a. Issued 30,000 common shares at $40 per share and issued 5,000 shares of preferred stock at $26 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (6)		1,330,000
	Common stock (+SE) (1)			1,200,000
	Preferred stock (+SE) (4)			25,000
	Additional paid-in capital, preferred stock (+SE) (5)			105,000
	(To record issuance of common stock and preferred stock)

Table (1)

Cash is an assets account and it increased the value of asset by $1,330,000. Hence, debit the cash account for $1,330,000.
Common stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $1,200,000, Hence, credit the common stock for $1,200,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $25,000. Hence, credit the preferred stock for $25,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $105,000. Hence, credit the additional paid-in capital, preferred stock account for $105,000.

Working note:

Calculate the value of common stock

$Common stock =( Number of share×Par value per share)=30,000 shares×$40=$1,200,000$ (1)

Calculate the cash received from common stock

$Cash received from common stock=( Number of share×Cash per share)=30,000 shares×$40=$1,200,000$ (2)

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=5,000 shares×$5=$25,000$ (3)

Calculate the cash received from preferred stock

$Cash received from preferred stock =( Number of share×Cash per share)=5,000 shares×$26=$130,000$ (4)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Cash received (4)−Preferred stock value (3))=($130,000−$25,000)=$105,000$ (5)

Calculate the value of total cash received from preferred stock and common stock

$Total cash received = (Cash received from common stock (2)+Cash received from preferred stock (4) )=$1,200,000+$130,000=$1,330,000$ (6)

b. Issued 9,000 shares of preferred stock at $20 each:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Cash (+A) (8)		64,000
	Preferred stock (+SE) (7)			10,000
	Additional paid-in capital, preferred stock (+SE) (9)			54,000
	(To record the issuance of preferred stock)

Table (2)

Cash is an assets account and it increased the value of asset by $64,000. Hence, debit the cash account for $64,000.
Preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $10,000. Hence, credit the preferred stock for $10,000.
Additional paid-in capital, preferred stock is a component of stockholder’s equity and it increased the value of stockholder’s equity by $54,000. Hence, credit the additional paid-in capital, preferred stock account for $54,000.

Working note:

Calculate the value of preferred stock

$Preferred stock =( Number of share×Par value per share)=2,000 shares×$5=$10,000$ (7)

Calculate the total cash received

$Total amount of cash received =( Number of share×Cash per share)=2,000 shares×$32=$64,000$ (8)

Calculate the value of additional paid in capital, preferred stock

$Additional paid-in capital = (Total cash received (8)−Preferred stock value (7))=($64,000−$10,000)=$54,000$ (9)

c. Repurchase of 3,000 common shares at $38 per share:

Date	Accounts title and explanation	Ref.	Debit ($)	Credit ($)
	Treasury stock (-SE) (10)		114,000
	Cash (-A)			114,000
	(To record the repurchase of common shares from investors)

Table (3)

Treasury stock is the contra-equity. There is an increase in the contra-equity which decreases the value of stockholders’ equity. Hence, debit the treasury stock with $114,000.
Cash is an asset. There is a decrease in the asset. Hence, credit cash account with $144,000

Working note:

Calculate the value of repurchase of shares

$Total amount of repurchase of shares=( Number of share×Cash per share)=3,000 shares×$38=$114,000$ (10)