Question

During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.

Jan. 10		Issued 80,000 shares for cash at $6 per share.
Mar. 1		Issued 5,000 shares to attorneys in payment of a bill for $35,000 for services rendered in helping the company to incorporate.
July 1		Issued 30,000 shares for cash at $8 per share.
Sept. 1		Issued 60,000 shares for cash at $10 per share.

(a)		Prepare the journal entries for these transactions, assuming that the common stock has a par value of $5 per share.
(b)		Prepare the journal entries for these transactions, assuming that the common stock is no-par with a stated value of $3 per share

Answer 1

Concepts and reason

Transaction: Transaction is an act of buying or selling goods or rendering any service that is reliably measured in terms of money.

Accounting: Accounting is a process of recording the transactions, classifying them in a specific manner, and then it is the process of summarizing, analyzing, and interpreting the results. It is a process of preserving the accounts.

Journal entry: Journal entry is the recording of transactions in a systematic manner as they occur. Thus, it is a summary of all the transactions which has debit and credit aspects recorded chronologically.

Stock: An equal part or a portion of company’s capital which indicates ownership of the holder in the company and that states that the shareholder has a claim in the profits and the assets of the company is referred to as a share. A bundle of fully paid shares is referred to as stock. The two main categories of stock are preferred stock and common stock.

Shares: Shares are part of the capital of the company subdivided into individual units. The types of shares are equity shares and preference shares. The person who purchases shares is known as shareholder.

Fundamentals

Common stock: Common stock is the stock issued by the company to the people having voting rights. It is termed to be as stockholders equity account. It is a form of corporate equity ownership. It is one of the forms of securities that it is issued to common shareholders. They are entitled to dividend and repayment of capital after payment is made to preference shareholders. It will be reported in balance sheet as liabilities.

Paid-in capital in excess of par value, Common stock: It is an excess amount paid by the investor over the par value of the share; it is shown on the equity section of the balance sheet.

a)

Prepare journal entries assuming that the common stock has a par value.

Working notes:

b)

Prepare journal entries assuming that the common stock has no par value.

Ans: Part a

Part b