Question

During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholder’s equity. The articles of incorporation authorized the issue of 8 million common shares, $1 par per share, and 1 million preferred shares, $50 par per share. Feb. 12 Sold 2 million common shares, for $9 per share. 13 Issued 40,000 common shares to attorneys in exchange for legal services. 13 sold 80,000 of its common shares and 4,000 preferred shares for a total of $945,000 Nov. 15 Issued 380,000 of its common shares it exchange for equipment for which the cash price was known to be $3,688,000.

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

Answer 1

Answer
Date	Account titles and explanation	Debit	Credit
Feb-12	Cash (2000000*9)	$1,80,00,000
	Common stock (2000000*1)		$   20,00,000
	Paid in capital in excess of par - Common Stock		$1,60,00,000
	(To records sale of common stock)
Feb-13	Legal expense (40000*9)	$     3,60,000
	Common stock (40000*1)		$        40,000
	Paid in capital in excess of par - Common Stock		$     3,20,000
	(To records issue of common stock o attorneys in exchange for legal services)
Feb-13	Cash	$     9,45,000
	Common stock (80000*1)		$        80,000
	Paid in capital in excess of par - Common Stock (80000*8)		$     6,40,000
	Preferred stock (4000*50)		$     2,00,000
	Paid in capital in excess of par - Preferred Stock		$        25,000
	(To records issue of common stock and Preferred stock)
Nov-15	Equipment	$   36,88,000
	Common stock (380000*1)		$     3,80,000
	Paid in capital in excess of par - Common Stock		$ 33,08,000
	(To records issue of common stock in exchange for Equipment)