Chapter 13, Problem 2PA

Stock transactions for corporate expansion

On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor:

At the annual stockholders’ meeting on March 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $11,000,000. The plan provided (a) that a building, valued at $3,375,000, and the land on which it is located, valued at $1,500,000, be acquired in accordance with preliminary negotiations by the issuance of 125,000 shares of common stock valued at $39 per share, (b) that 40,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $4,000,000. The plan was approved by the stockholders and accomplished by the following transactions:

May 11. Issued 125,000 shares of common stock in exchange for land and a building, according to the plan.

20. Issued 40,000 shares of preferred stock, receiving $52 per share in cash.

31. Borrowed $4,000,000 from Laurel National, giving a 5% mortgage note.

Instructions

Journalize the entries to record the May transactions.