Question

In: Accounting

Anderson Co. was organized on April 4, 2018. It was authorized to issue 1,000,000 shares of...

Anderson Co. was organized on April 4, 2018. It was authorized to issue 1,000,000 shares of $10 par common stock and 100,000 shares of 5 percent cumulative class A preferred stock. The class A stock had a state value of $100 per share. The following stock transactions pertain to Franklin Industries:

a) Issued 150,000 shares of common stock for $14 per share.

b) Issued 25,000 shares of class A preferred stock for $103 per share.

Prepare journal entries for both of these transactions. Show the stockholders equity section of the balance sheet immediately these transactions.

Solutions

Expert Solution

  • All working forms part of the answer
  • Requirement 1: Journal Entries

Transaction

Accounts title

Debit

Credit

a)

Cash [150,000 shares x $14]

$                  21,00,000.00

Common Stock [150,000 shares x $10 par]

$           15,00,000.00

Additional paid in capital in excess of Par - Common Stock[150,000 shares x $(14-10)]

$             6,00,000.00

(common stock issued)

b)

Cash [25000 shares x $103]

$                  25,75,000.00

Preferred Stock [25000 shares x $100 par]

$           25,00,000.00

Additional paid in capital in excess of Par - Preferred Stock[25,000 shares x $(103-100)]

$                 75,000.00

(preferred stock issued)

  • Requirement 2

Stockholders’ Equity

Common Stock ($10 par, 1,000,000 authorised, 150,000 shares issued & outstanding

$                    15,00,000.00

Additional paid in capital in excess of Par - Common Stock

$                      6,00,000.00

Preferred Stock ($100 par, 5% 100000 authorised, 25000 issued & outstanding)

$                    25,00,000.00

Additional paid in capital in excess of Par - Preferred Stock

$                          75,000.00

Total Contributed Capital

$                    46,75,000.00

Retained earnings

$                                         -  

Total Stockholder's Equity

$                    46,75,000.00


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