STOCK SUBSCRIPTIONS AND
June | 30 | Incurred the following costs of incorporation: |
Incorporation fees $ 800 Attorney's fees 9,000 Promotion fees 8,000 |
||
July | 15 | Issued 7,000 shares of $10 par common stock for $73,000 cash. |
Aug. | 1 | Received subscriptions for 8,000 shares of $10 par common stock for $81,500. |
15 | Issued 16,000 shares of $10 par common stock in exchange for a building and fixtures with a fair market value of $165,000. | |
31 | Received a payment of $51,500 for the common stock subscription. | |
Sept. | 3 | Purchased 2,000 shares of its own $10 par common stock for $11 a share. |
18 | Received the balance in full for the common stock subscription and issued the stock. | |
30 | Sold 800 shares of its treasury stock for $11.50 a share. | |
Oct. | 15 | Issued 3,000 shares of $40 par, 5% |
31 | Sold 400 shares of its treasury stock for $10.75 a share. |
REQUIRED
Prepare
Prepare journal entries.
Explanation of Solution
Capital stock subscriptions:
Capital stock subscriptions are an agreement where in a buyer makes a contract to buy the shares of stock from a corporation at a particular price.
Treasury Stock:
It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.
Journal entry:
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Accounting rules for Journal entries:
- To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
- To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.
Record the journal entries:
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
June 30 | Organization Expenses (1) | 17,800 | |
Cash | 17,800 | ||
(To record corporate organization costs) |
Table (1)
- Organization expenses are component of stockholders’ equity and it is decreased. Therefore, debit organization expenses account by $17,800.
- Cash is an asset and it is decreased. Therefore, credit cash account by $17,800.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
July 15 | Cash | 73,000 | |
Common Stock | 70,000 | ||
Paid-In Capital in Excess of Par— Common Stock (2) | 3,000 | ||
(To record the stock issued at premium) |
Table (2)
- Cash is an asset and it is increased. Therefore debit cash account by $73,000.
- Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $70,000.
- Paid-In Capital in Excess of Par— Common Stock is a component of stockholders equity and it is increased. Therefore credit paid-In Capital in Excess of Par— Common Stock account by $3,000.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
August 1 | Common Stock Subscriptions Receivable | 81,500 | |
Common Stock Subscribed | 80,000 | ||
Paid-In Capital in Excess of Par— Common Stock (3) | 1,500 | ||
( To record the subscription received) |
Table (3)
- Common stock subscriptions receivable is a contra stockholders’ equity and it is increased. Therefore debit common stock subscriptions receivable account by $81,500.
- Common stock subscribed is a component of stockholders’ equity and it is increased. Therefore credit common stock subscribed account by $80,000.
- Paid-In Capital in Excess of Par— Common Stock is a component of stockholders’ equity and it is increased. Therefore, credit Paid-In Capital in Excess of Par— Common Stock account by $1,500.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
August 15 | Building | 165,000 | |
Common Stock | 160,000 | ||
Paid-In Capital in Excess of Par— Common Stock (4) | 5,000 | ||
(To record the stock issued at premium) |
Table (4)
- Building is an asset and it is increased. Therefore, debit truck account by $165,000.
- Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $160,000.
- Paid-In Capital in Excess of Par— Common Stock is a component of stockholders’ equity and it is increased. Therefore, credit Paid-In Capital in Excess of Par— Common Stock account by $5,000.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
August 31 | Cash | 51,500 | |
Common Stock Subscriptions Receivable | 51,500 | ||
( To record the payment of subscription) |
Table (5)
- Cash is an asset and it is increased. Therefore debit cash account by $51,500.
- Common stock subscriptions receivable is a contra stockholders’ equity and it is decreased. Therefore credit common stock subscriptions receivable account by $51,500.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 3 | Common Treasury Stock | 22,000 | |
Cash | 22,000 | ||
(To record the purchase of treasury stock) |
Table (6)
- Common treasury stock is a contra-stockholders’ equity and it is increased. Therefore, debit common treasury stock account by 22,000.
- Cash is an asset and it is decreased. Therefore, credit cash account by $22,000.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 18 | Cash | 30,000 | |
Common Stock Subscriptions Receivable | 30,000 | ||
( To record the payment of subscription) |
Table (7)
- Cash is an asset and it is increased. Therefore debit cash account by $30,000.
- Common stock subscriptions receivable is a contra stockholders’ equity and it is decreased. Therefore credit common stock subscriptions receivable account by $30,000.
Note: In this case, out of $81,500 subscription receivables for common stock, $51,500 is received previously and the final payment of $30,000
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 18 | Common Stock Subscribed | 80,000 | |
Common Stock | 80,000 | ||
( To record issuance of common stock) |
Table (8)
- Common stock subscribed is a component of stockholders’ equity and it is decreased. Therefore, debit common stock subscribed account by $80,000.
- Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $80,000.
Note: If the stock subscriptions are fully paid, the stock is issued by the corporation. Now the common stock subscribed account is debited and common stock is credited for the par amount of $100,000
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 30 | Cash | 92,000 | |
Common Treasury Stock | 88,000 | ||
Paid-In Capital from Sale of Treasury Stock (5) | 4,000 | ||
(To record sale of treasury stock) |
Table (9)
- Cash is an asset and it is increased. Therefore debit cash account by $92,000.
- Common treasury stock is a contra-stockholders’ equity and it is decreased. Therefore, credit common treasury stock account by $88,000.
- Paid-In Capital from Sale of Treasury Stock is a component of stockholders’ equity and it is increased. Therefore, credit Paid-In Capital from Sale of Treasury Stock account by $4,000.
Working note 1:
Calculate the organization expenses:
Working note 2:
Calculate Paid-In Capital in Excess of Par— Common Stock:
Working note 3:
Calculate Paid-In Capital in Excess of Par— Common Stock:
Working note 4:
Calculate Paid-In Capital in Excess of Par— Common Stock:
Working note 5:
Calculate Paid-In Capital from Sale of Treasury Stock:
Want to see more full solutions like this?
Chapter 20 Solutions
College Accounting, Chapters 1-27
- STOCK SUBSCRIPTIONS AND TREASURY STOCK Rogers Hart formed a corporation and had the following organization costs and stock transactions during the year: June 30 Incurred the following costs of incorporation: July 15 Issued 8,000 shares of 10 par common stock for 82,000 cash. Aug. 1 Received subscriptions for 10,000 shares of 10 par common stock for 101,500. 15 Issued 10,000 shares of 10 par common stock in exchange for a building with a fair market value of 104,800. 31 Received a payment of 51,500 for the common stock subscription. Sept. 3 Purchased 1,000 shares of its own 10 par common stock for 11 a share. 18 Received the balance in full for the common stock subscription and issued the stock. 30 Sold 500 shares of its treasury stock for 11.70 a share. Oct. 15 Issued 4,000 shares of 25 par, 8 % preferred stock in exchange for land with a fair market value of 105,000. 31 Sold 500 shares of its treasury stock for 10.50 a share. REQUIRED Prepare journal entries for these transactions.arrow_forwardOn April 2 a corporation purchased for cash 6,000 shares of its own $13 par common stock at $27 a share. It sold 4,000 of the treasury shares at $30 a share on June 10. The remaining 2,000 shares were sold on November 10 for $23 a share. a. Journalize the entries to record the purchase (treasury stock is recorded at cost). If an amount box does not require an entry, leave it blank b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it blank.arrow_forwardHanson Co. issued 10,000 shares of its $5 par common stock for $15 a share. Assume the sale occurred after the initial issuance at incorporation. The entry to record the sale and related expenses would include a Group of answer choices a. credit to Additional Paid-in Capital on Common Stock for $81,500. b. credit to Organization Expense for $18,500. c. credit to Common Stock for $150,000 d. debit to Cash for $150,000.arrow_forward
- On April 2, a corporation purchased for cash 6,000 shares of its own $14 par common stock at $27 per share. It sold 4,000 of the treasury shares at $30 per share on June 10. The remaining 2,000 shares were sold on November 10 for $23 per share. a. Journalize the entry for the purchase (treasury stock is recorded at cost). If an amount box does not require an entry, leave it blank April 2 b. Journalize the entries for the sale of the stock. If an amount box does not require an entry, leave it blank. Jun. 10 November 10arrow_forwardThe charter of a corporation provides for the issuance of 120,000 shares of common stock. Assume that 44,000 shares were originally issued and 4,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1-per-share dividend is declared? Oa. $120.000 Ob, $40.000 Oc. $44,000 Od. $4.000arrow_forward1) The following transactions took place in June for the Holista Corporation: June 1 Issued 1,000 shares of $100 preferred shares. 10 Issued 3,000 common shares for $18 per share. 15 Received land with a fair value of $60,000 and a building with a fair value of $180,000 in exchange for 15,000 common shares. Prepare journal entries for the above transactions.arrow_forward
- Aug. 1 Purchased 600 shares of the 100,000 shares outstanding $10 par common shares of Dankin Corporation for $5,100. 1 Purchased 3,500 shares of the 10,000 shares no par common shares of Ramon Co. for $45,700. The investment was accounted the equity method. Sept. 1 Received a cash dividend of $1 per share on the Dankin Corporation stock acquired on August 1. 1 Received a cash dividend of $2 per share on the Ramon Co. stock acquired on August 1. Dec. 31 Sold 100 shares of the Dankin Corporation shares acquired on August 1 for $2,100. 31 Dankin Corporation reported net income of $30,000 and Ramon Company’s reported net income was $50,000. If an amount box does not require an entry, leave it blank. Aug. 1 fill in the blank 2 fill in the blank 4 Aug. 1 fill in the blank 6 fill in the blank 8 Sept. 1 fill in the blank 10 fill in the blank 12 Sept. 1 fill in the blank 14 fill in the blank 16 Dec. 31 fill in…arrow_forwardQuestion: Worldwide Company obtained a charter from the state in January that authorized 200,000 shares of common stock, $10 par value. During the first year, the company earned $38,400 and the following selected transactions occurred in the order given: a. Issued 62,000 shares of the common stock at $13 cash per share. b. Reacquired 2,200 shares at $16 cash per share from stockholders; the shares are now held in treasury. C. Reissued 1,100 of the shares in transaction (b) two months later at $19 cash per share. Required: 1. Indicating the account, amount, and direction of the effect on above transaction. a. Assets Liabilities Stockholders' Equity b. C. 2. Prepare journal entries to record each transaction. 3. Prepare the stockholders' equity section of the balance sheet at December 31. (TIP: Because this is the first year of operations, Retained Earnings has a zero balance at the beginning of the year)arrow_forwardWhen Wisconsin Corporation was formed on January 1, the corporate charter provided for 100,000 shares of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 8,500 shares of stock at a price of $16 per share. The entry to record the above transaction would include a a.debit to Common Stock for $85,000 b.debit to Cash for $85,000 c.credit to Paid-In Capital in Excess of Par for $51,000 d.credit to Common Stock for $136,000arrow_forward
- The charter of a corporation provides for the issuance of 108,244 shares of common stock. Assume that 44,779 shares were originally issued and 4,084 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2-per-share dividend is declared? a. $4,084 b. $44,779 c. $108,244 d. $81,390arrow_forwardOrlando Corporation incorporated on January 2 of the current year. During the year, Orlando had the following transactions: • issued 90,000 shares of common stock at $35 per share. The par value per share is $1. • purchased 2,000 shares of treasury stock at $24 per share • had net income of $400,000. What is the total amount of stockholders' equity as of December 31 of the current year? O A. $3,150,000 O B. $3,550,000 Oc. $3,502,000 OD. $3,198,000arrow_forwardOn April 2 a corporation purchased for cash 5,000 shares of its own $15 par common stock at $26 a share. It sold 3,000 of the treasury shares at $29 a share on June 10. The remaining 2,000 shares were sold on November 10 for $22 a share. a. Journalize the entries to record the purchase (treasury stock is recorded at cost). If an amount box does not require an entry, leave it blank Apr. 2 b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it blank. Jun. 10 Nov. 10 M Y ▼ ♥arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,