Question

art A
During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue 102 million common shares, $1 par per share.

Required:
Prepare the appropriate journal entries to record each transaction.

Jan.		9		Issued 40 million common shares for $12 per share.
Mar.		11		Issued 4,100 shares in exchange for custom-made equipment. McCollum’s shares have traded recently on the stock exchange at $12 per share.

Part B
A new staff accountant for the McCollum Corporation recorded the following journal entries during the second year of operations. McCollum retires shares that it reacquires (restores their status to that of authorized but unissued shares).

		($ in millions)
Date	General Journal	Debit	Credit
Sept. 1	Common stock	2
	Retained earnings	32
	Cash		34
Dec. 1	Cash	18
	Common stock		1
	Gain on sale of previously issued shares		17

Required:
Prepare the journal entries that should have been recorded for each of the transactions.

Answer 1

	Answer:
A)
Date	Account Tittle	Debit (in $ )	Credit (in $ )
Jan - 09	Cash (40 millionX $ 12 )	$ 480,000,000
	Common Stock                   (40 millionX $ 1 ))		$ 40,000,000
	Paid in Capital in Excess of Par - Bal. Fig                  ( 40 million x $ 11 )		$ 440,000,000
Mar. -11	Equipment ( 4,100 shares x $ 12)	$ 49,200
	Common Stock                   ( 4,100 shares x $ 1)		$ 4,100
	Paid in Capital in Excess of Par - Bal. Fig		$ 45,100
B)
Date	Account Tittle	Debit	Credit
Sept - 01	Common Stock (2 million Shares x $ 1)	$ 2,000,000
	Paid in capital in Excess of Par (2 million Shares x $ 11)	$ 22,000,000
	Retained Earnings - Bal. Fig,	$ 10,000,000
	Cash		$ 34,000,000
Dec . - 01	Cash	$ 18,000,000
	Common Stock		$ 1,000,000
	Paid in Capital in Excess of Par		$ 17,000,000