Question

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.

Answer 1

• 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