Question

Stockholders’ Equity: Transactions and Balance Sheet Presentation

Torey Corporation was organized on April 1, with an authorization of 25,000 shares of six percent, $50 par value preferred stock and 200,000 shares of $5 par value common stock. During April, the following transactions affecting stockholders’ equity occurred:

Apr.	1	Issued 80,000 shares of common stock at $40 cash per share.
	3	Issued 2,000 shares of common stock to attorneys and promoters in exchange for their services in organizing the corporation. The services were valued at $31,000.
	8	Issued 3,000 shares of common stock in exchange for equipment with a fair market value of $55,000.
	20	Issued 6,000 shares of preferred stock for cash at $80 per share.

Required

Required

a. Prepare journal entries to record the above transactions.

General Journal
Date	Description	Debit	Credit
Apr.01	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Paid-in-Capital in Excess of Par Value - Common Stock	Answer	Answer
	Issued shares of common stock.
Apr.03	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Issued common stock for organization costs.
Apr.08	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Issued common stock for equipment.
Apr.20	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Preferred Stock	Answer	Answer
	AnswerCashCommon StockEquipmentOrganization CostsPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred Stock	Answer	Answer
	Issued shares of preferred stock. b. Prepare the stockholders’ equity section of the balance sheet at April 30. Assume that the net income for April is $60,000. Stockholders' Equity Paid in Capital AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-Capital Answer AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-Capital Answer Answer Additional Paid-in-Capital Paid-in-Capital in Excess of Par value - Preferred Stock Answer Paid-in-Capital in Excess of Par value - Common Stock Answer Answer AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-Capital Answer AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-Capital Answer AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-Capital Answer

Answer 1

Journa Entry- Torey Corporation
Date	Accounts Title and Explanations	Debit	Credit
1-Apr	Cash (80000 Share *$40)	$3,200,000.00
	Common stock (80000*$5)		$400,000.00
	Paid in capital in excess of Par value -common stock		$2,800,000.00
	Record Issuance of Common stock
03-Apr	Organizational expenses	$31,000.00
	Common stock (20000 shares*$5)		$10,000.00
	Paid in capital in excess of Par value -common stock		$21,000.00
	Record Issuance of Common stock in lieu of service
08-Apr	Equipment (at fair value)	$55,000.00
	Common stock (3000 shares*$5)		$15,000.00
	Paid in capital in excess of Par value -common stock		$40,000.00
	Record Issuance of Common stock in lieu of Equipment
20-Apr	Cash (6000 shares*80)	$480,000.00
	Preferred stock (6000 shares*$50)		$300,000.00
	Paid in capital in excess of par - Preferred stock		$180,000.00
	Record Issuance of Preferred stock

Torey Corporation
Balance sheet (Partial)
Paid in capital
Capital stock
Preferred stock		$300,000.00
Common stock (400000+10000+15000)		$425,000.00
Total capital stock		$725,000.00
Additional paid in capital:
Paid in capital in excess of par value-Preferred shares	$180,000.00
Paid in capital in excess of stated-Common shares	$2,861,000.00
tal additional paid in capital		$3,041,000.00
tal paid in capital		$3,766,000.00