Question

Issuing Stock

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 75,000 shares of preferred 3% stock, $75 par and 450,000 shares of $10 par common stock. The following selected transactions were completed during the first year of operations:

Journalize the transactions.

If an amount box does not require an entry, leave it blank.

Feb. 5. Issued 140,000 shares of common stock at par for cash.

Feb. 5.	Cash	fill in the blank 0770d002a072046_2	fill in the blank 0770d002a072046_3
	Common Stock	fill in the blank 0770d002a072046_5	fill in the blank 0770d002a072046_6

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Feb. 5. Issued 400 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.

Feb. 5.	Organizational Expenses	fill in the blank d3059404cfa0fa8_2	fill in the blank d3059404cfa0fa8_3
	Common Stock	fill in the blank d3059404cfa0fa8_5	fill in the blank d3059404cfa0fa8_6

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Recall that stock may be issued for reasons other than to receive cash. What are these shares paying for?

Apr. 9. Issued 23,500 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $43,000, $234,000, and $52,000, respectively.

Apr. 9.	Land	fill in the blank 283104041f97fe5_2	fill in the blank 283104041f97fe5_3
	Buildings	fill in the blank 283104041f97fe5_5	fill in the blank 283104041f97fe5_6
	Equipment	fill in the blank 283104041f97fe5_8	fill in the blank 283104041f97fe5_9
	Common Stock	fill in the blank 283104041f97fe5_11	fill in the blank 283104041f97fe5_12
	Paid-In Capital in Excess of Par-Common Stock	fill in the blank 283104041f97fe5_14	fill in the blank 283104041f97fe5_15

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Record the assets, and increase the common stock account by the par value of the shares. Record any amount above par in a separate paid-in capital equity account.

Recall that shares of stock can be issued to acquire assets. At what value must the preferred stock and common stock accounts be recorded?

June 14. Issued 23,000 shares of preferred stock at $90 for cash.

June 14.	Cash	fill in the blank c869f1fa6068067_2	fill in the blank c869f1fa6068067_3
	Preferred Stock	fill in the blank c869f1fa6068067_5	fill in the blank c869f1fa6068067_6
	Paid-In Capital in Excess of Par-Preferred Stock	fill in the blank c869f1fa6068067_8	fill in the blank c869f1fa6068067_9

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Feb. 5	Cash ( 140,000 Shares x $ 10 )	$ 1,400,000
	Common Stock		$ 1,400,000
	(To record the issue of Common Stock )
Feb. 5	Organization Expense ( 400 Shares x $ 10 )	$ 4,000
	Common Stock		$ 4,000
	(To record the issue of Common Stock )
Apr. 9	Land	$ 43,000
	Buildings	$ 234,000
	Equipment	$ 52,000
	Common Stock                ( 23,500 Shares x $ 10 )		$ 235,000
	Paid in Capital in excess of par-Common Stock		$ 94,000
	(To record the issue of Common Stock in exchange )
June 14	Cash ( 23,000 Shares x $ 90 )	$ 2,070,000
	Preferred Stock              ( 23,000 Shares x $ 75 )		$ 1,725,000
	Paid in Capital in Excess of par-Preferred Stock		$ 345,000
	(To record the issue of Preferred Stock )