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Question #2 During its first year of operations, Roldan Corporation had the following transactions pertaining to...
Question #2
During its first year of operations, Roldan Corporation had the following transactions pertaining to its common stock.
Jan. 10 Issued 60,000 shares for cash at $5 per share.
July 1 Issued 50,000 shares for cash at $8 per share.
Instructions:
(a) Journalize the transactions, assuming that the common stock has a par value of $5 per share.
(b) Journalize the transactions, assuming that the common stock is no-par with a stated value of $2 per share.
(c) Compare the effect the two Jan. 10 transactions would have on Roldan’s assets, liabilities, stockholders’ equity, and net income.
(d) Compare the effect the two July 1 transactions would have on Roldan’s assets, liabilities, stockholders’ equity, and net income.
Solutions
Expert Solution
(a)
| Date | Account Titles and Explanation | Debit | Credit |
| Jan. 10 | Cash (60000 x $5) | 300000 | |
| Common stock (60000 x $5) | 300000 | ||
| (To record issue of common stock) | |||
| Jul. 1 | Cash (50000 x $8) | 400000 | |
| Common stock (50000 x $5) | 250000 | ||
| Paid-in capital in excess of par value (50000 x $3) | 150000 | ||
| (To record issue of common stock) |
(b)
| Date | Account Titles and Explanation | Debit | Credit |
| Jan. 10 | Cash (60000 x $5) | 300000 | |
| Common stock (60000 x $2) | 120000 | ||
| Paid-in capital in excess of stated value (60000 x $3) | 180000 | ||
| (To record issue of common stock) | |||
| Jul. 1 | Cash (50000 x $8) | 400000 | |
| Common stock (50000 x $2) | 100000 | ||
| Paid-in capital in excess of stated value (50000 x $6) | 300000 | ||
| (To record issue of common stock) |
(c)
| Balance Sheet | Income Statement | |||||||||||
| Date | Assets | = | Liab. | + | Equity | Rev. | - | Exp. | = | Net Inc. | ||
| Cash | Common stock | PIC in excess of par value | PIC in excess of stated value | |||||||||
| Jan. 10 | 300000 | = | NA | + | 300000 | NA | NA | NA | - | NA | = | NA |
| Jan. 10 | 300000 | = | NA | + | 120000 | NA | 180000 | NA | - | NA | = | NA |
(d)
| Balance Sheet | Income Statement | |||||||||||
| Date | Assets | = | Liab. | + | Equity | Rev. | - | Exp. | = | Net Inc. | ||
| Cash | Common stock | PIC in excess of par value | PIC in excess of stated value | |||||||||
| Jul. 1 | 400000 | = | NA | + | 250000 | 150000 | NA | NA | - | NA | = | NA |
| Jul. 1 | 400000 | = | NA | + | 100000 | NA | 300000 | NA | - | NA | = | NA |
Note: The effect of the transactions on the assets, liabilities, stockholders' equity and net income under (c) and (d) is shown by way of an accounting equation. NA denotes no effect.
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