Question

On February 12, Quality Carpet Inc., a carpet wholesaler, issued for cash 1,000,000 shares of no-par common stock (with a stated value of $0.25) at $1.20, and on August 3, it issued for cash 10,000 shares of preferred stock, $15 par at $21.

Required:

A.

Journalize the entries for February 12 and August 3, assuming that the common stock is to be credited with the stated value. Refer to the Chart of Accounts for exact wording of account titles.

B.

What is the total amount invested (total paid-in capital) by all stockholders as of August 3? CHART OF ACCOUNTS Quality Carpet Inc. General Ledger ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Common Stock 313 Paid-In Capital in Excess of Stated Value-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary A. Journalize the entries for February 12 and August 3, assuming that the common stock is to be credited with the stated value. Refer to the Chart of Accounts for exact wording of account titles. PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 6 B. What is the total amount invested (total paid-in capital) by all stockholders as of August 3?

Answer 1

• All working forms part of the answer
• Requirement A

ACCOUNTING EQUATION
	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Feb-12	Cash	110	$     1,200,000.00		Increase by 1200000
2		Common Stock	311		$        250,000.00			Increase by 250000
3		Paid in Capital in Excess of Stated Value - Common Stock	313		$        950,000.00			Increase by 950000
		(Common Stock issued)
4	Aug-03	Cash	110	$        210,000.00		Increase by 210000
5		Preferred Stock	321		$        150,000.00			Increase by 150000
6		Paid-In Capital in Excess of Par-Preferred Stock	322		$          60,000.00			Increase by 60000
		(Preferred Stock issued)

• Requirement B

Total Amount Invested = $ 1,200,000 + $ 210,000 = $ 1,410,000