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In: Accounting

Sheridan Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of...

Sheridan Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.

Date

Account Titles and Explanation

Debit

Credit

May 2

Cash

208,000

   Capital Stock

208,000

(Issued 13,000 shares of $5 par value common stock at $16 per share)

May 10

Cash

660,000

   Capital Stock

660,000

(Issued 11,000 shares of $30 par value preferred stock at $60 per share)

May 15

Capital Stock

14,400

   Cash

14,400

(Purchased 900 shares of common stock for the treasury at $16 per share)

May 31

Cash

13,500

   Capital Stock

7,500

   Gain on Sale of Stock

6,000

(Sold 750 shares of treasury stock at $18 per share)


On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.

Solutions

Expert Solution

Journal entry :

date accounts & explanation debit credit
May 2 Cash (13000*16) 208000
    Common stock (13000*5) 65000
    Paid in capital from excess of par value-common stock 143000
(Issued 13,000 shares of $5 par value common stock at $16 per share)
May 10 Cash (11000*60) 660000
   Preferred stock (11000*30) 330000
    Paid in capital in excess of par value-Preferred stock 330000
(Issued 11,000 shares of $30 par value preferred stock at $60 per share)
May 15 Treasury stock (900*16) 14400
     Cash 14400
(Purchased 900 shares of common stock for the treasury at $16 per share)
May 31 Cash (750*18) 13500
    Treasury stock (750*16) 12000
    Paid in capital from sale of treasury stock 1500
(Sold 750 shares of treasury stock at $18 per share)

ekkarill92 answered 2 years ago
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