Question

Prepare journal entries to record each of the following four separate issuances of stock.

1. A corporation issued 5,000 shares of $5 par value common stock for $30,000 cash.
2. A corporation issued 2,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $56,500. The stock has a $2 per share stated value.
3. A corporation issued 2,500 shares of no-par common stock to its promoters in exchange for their efforts, estimated to be worth $56,500. The stock has no stated value.
4. A corporation issued 1,250 shares of $50 par value preferred stock for $119,000 cash.

Answer 1

A	1	Cash	30,000
		Common stock, $5 par value		25,000
		Paid-in capital in excess of par value, Common stock		5,000
B	2	Organization expenses	56,500
		Common stock, $2 stated value		5,000
		Paid-in capital in excess of stated value, common stock		51,500
C	3	Organization expenses	56,500
		Common stock, no-par value		56,500
D	4	Cash	119,000
		Preferred stock, $50 par value		62,500
		Paid-in capital in excess of par value, preferred stock		56,500

 

 

Explanation

 

1.
Common stock, $5 par value = 5,000 shares × $5 per share = $25,000
Paid in capital in excess of par value, common stock = $30,000 – $25,000 = $5,000
 
4.
Preferred stock, $50 par value = 1,250 shares × $50 per share = $62,500
Paid in capital in excess of par value, preferred stock = $119,000 – $62,500 = $56,500

 

Common stock, $5 par value = 5,000 shares × $5 per share = $25,000