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
- Provide a detailed description of the importance of an accounting firm business and the essential impact it offers to the market/economy.arrow_forwardProvide a detailed description of opening an accounting firm business offers to the market and then answer the following questions: What benefits to the market does an Accounting Firm provide? How can an Accounting Firm approach the market better than the competition?arrow_forwardSubject:- General Accountarrow_forward
- During the year, Kiner Company made an entry to write off a $9,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $315,000 and the balance in the allowance account was $27,000. The net realizable value of accounts receivable after the write-off entry was: A. $200,000. B. $184,000. C. $176,000. D. $288,000. answerarrow_forwardProvide answerarrow_forwardCalculate the equity premiumarrow_forward
- DJ Chase carries portfolios of both trading securities and available-for-sale securities. At the end of 2018 and 2017, the trading securities were valued at $468.4 billion and $595.6 billion, respectively; and the available-for-sale securities were valued at $205.9 billion and $85.4 billion, respectively. Together, the investments comprise about 25 percent of the company's total assets as of December 31, 2018. Unrealized gains reported on the 2018 income statement totaled $9.9 billion. Trading securities are carried on the balance sheet at market value. Compute the net decrease in the investment in trading securities during 2018.arrow_forwardPlease provide this question solution general accountingarrow_forwardTrue answer financial accountingarrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,