College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
bartleby

Videos

Textbook Question
Book Icon
Chapter 20, Problem 9SPB

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.

Expert Solution & Answer
Check Mark
To determine

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 entry:

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 June 30Organization Expenses (1) 14,900 
  Cash 14,900
  (To record corporate organization costs) 

Table (1)

  • Organization expenses are component of stockholders’ equity and it is decreased. Therefore, debit organization expenses account by $14,900.
  • Cash is an asset and it is decreased. Therefore, credit cash account by $14,900.
DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 July 15Cash 82,000 
  Common Stock (8,000shares×$10) 80,000
  Paid-In Capital in Excess of Par— Common Stock (2) 2,000
  (To record the stock issued at premium) 

Table (2)

  • Cash is an asset and it is increased. Therefore debit cash account by $82,000.
  • Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock 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 $2,000.
DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 August 1Common Stock Subscriptions Receivable 101,500 
  Common Stock Subscribed (10,000shares×$10) 100,000
  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 $101,500.
  • Common stock subscribed is a component of stockholders’ equity and it is increased. Therefore credit common stock subscribed account by $100,000.
  • 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.
DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 August 15Building 104,800 
  Common Stock (10,000shares×$10) 100,000
  Paid-In Capital in Excess of Par— Common Stock (4) 4,800
 (To record the stock issued at premium) 

Table (4)

  • Building is an asset and it is increased. Therefore, debit truck account by $104,800.
  • Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $100,000.
  • 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 $4,800.
DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 August 31Cash 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.
DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 September 3Common Treasury Stock (1,000shares×$11) 11,000 
  Cash11,000 
  (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 $11,000.
  • Cash is an asset and it is decreased. Therefore, credit cash account by $11,000.
DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 September 18Cash 50,000 
  Common Stock Subscriptions Receivable 50,000
  ( To record the payment of subscription) 

Table (7)

  • Cash is an asset and it is increased. Therefore debit cash account by $50,000.
  • Common stock subscriptions receivables are a component of stockholders’ equity and it is increased. Therefore credit common stock subscriptions receivable account by $50,000.

Note: In this case, out of $101,500 subscription receivables for common stock, $51,500 is received previously and the final payment of $50,000 ($101,500$51,500) is made by the subscriber now.

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 September 18Common Stock Subscribed  100,000 
  Common Stock100,000 
  ( 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 $100,000.
  • Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $100,000.

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(10,000shares×$10) .

DateAccount Titles and Explanation

Debit

(Amount in $)

Credit

(Amount in $)

 September 30Cash (800shares×$11.50) 5,750 
  Common Treasury Stock (800shares×$11)5, 500 
  Paid-In Capital from Sale of Treasury Stock (5) 250
 (To record sale of treasury stock) 

Table (9)

  • Cash is an asset and it is increased. Therefore debit cash account by $5,750.
  • Common treasury stock is a contra-stockholders’ equity and it is decreased. Therefore, credit common treasury stock account by $5,500.
  • 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 $250.

Working note:

(1) Calculate the organization expenses:

Organizationexpenses=(Incorporationfees+Attorney'sfees+Promotionexpenses)=$900+$6,000+$8,000=$14,900

(2) Calculate Paid-In Capital in Excess of Par— Common Stock:

Paid-In Capital in Excess of Par— common Stock} =CashreceivedParvalueofstock=$82,000$80,000=$2,000

(3) Calculate Paid-In Capital in Excess of Par— Common Stock:

Paid-In Capital in Excess of Par— common Stock} =SubscriptionamountParvalueofstock=$101,500$100,000=$1,500

(4) Calculate Paid-In Capital in Excess of Par— Common Stock:

Paid-In Capital in Excess of Par— Common Stock} =FairmarketvalueofstockParvalueofstock=$104,800$100,000=$4,800

(5) Calculate Paid-In Capital from Sale of Treasury Stock:

Paid-In Capital from saleoftreasurystock} =CashreceivedCost=$5,750$5,500=$250

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Rogers & Hart formed a corporation and had the following organization costs and stock transactions during the year: Transactions: June 30 Incurred the following costs of incorporation:     Incorporation fees $ 900     Attorneys’ fees 6,000     Promotion fees 8,000 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…
When Bayou Corporation was formed on January 1, 20xx, the corporation was authorized to issue 100,000 share 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 9,000 shares of stock at a price of $25 per share.The entry to record the above transaction would include a Select one: a. debit to Cash for $90,000 b. credit to Paid in Capital in Excess of Par for $135,000 c. credit to Common Stock for $225,000 d. debit to Common Stock for $90,000
On 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.

Chapter 20 Solutions

College Accounting, Chapters 1-27

Ch. 20 - Prob. 1CECh. 20 - Genous Company has 20,000 shares of common stock...Ch. 20 - Prepare general journal entries for the following...Ch. 20 - Prepare the stockholders equity section of the...Ch. 20 - Prob. 1RQCh. 20 - Prob. 2RQCh. 20 - Prob. 3RQCh. 20 - Prob. 4RQCh. 20 - Prob. 5RQCh. 20 - If a corporation issues only one class of stock,...Ch. 20 - Prob. 7RQCh. 20 - Prob. 8RQCh. 20 - How is common stock subscriptions receivable...Ch. 20 - Prob. 10RQCh. 20 - Prob. 11RQCh. 20 - ORGANIZATION COSTS BB Electric decided to...Ch. 20 - DIVIDEND ALLOCATIONS Situation 1 Nguyen Company...Ch. 20 - STOCK ISSUANCE (PAR, NO-PAR, AND STATED VALUE) The...Ch. 20 - Prob. 4SEACh. 20 - STOCKHOLDERS EQUITY SECTION After closing its...Ch. 20 - PAR AND NO-PAR, COMMON AND PREFERRED STOCK...Ch. 20 - STATED VALUE, COMMON AND PREFERRED STOCK, AND...Ch. 20 - STOCK SUBSCRIPTIONS Juneau Associates had the...Ch. 20 - STOCK SUBSCRIPTIONS AND TREASURY STOCK Nash Roth...Ch. 20 - STOCKHOLDERS EQUITY SECTION After closing its...Ch. 20 - Prob. 1SEBCh. 20 - Prob. 2SEBCh. 20 - STOCK ISSUANCE (PAR, NO-PAR, AND STATED VALUE) The...Ch. 20 - STOCK ISSUANCE (NONCASH ASSETS, SUBSCRIPTIONS, AND...Ch. 20 - STOCKHOLDERS EQUITY SECTION After closing its...Ch. 20 - PAR AND NO-PAR, COMMON AND PREFERRED STOCK Valdez...Ch. 20 - STATED VALUE, COMMON AND PREFERRED STOCK, AND...Ch. 20 - STOCK SUBSCRIPTIONS Athletics West had the...Ch. 20 - STOCK SUBSCRIPTIONS AND TREASURY STOCK Rogers ...Ch. 20 - STOCKHOLDERS EQUITY SECTION After closing its...Ch. 20 - Prob. 1MYWCh. 20 - Prob. 1ECCh. 20 - Stockholders equity accounts and other related...Ch. 20 - Prepare general journal entries for the following...
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Financial instruments products; Author: fi-compass;https://www.youtube.com/watch?v=gvxozM3TUIg;License: Standard Youtube License