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Recording the Issuance of Common and Preferred Stock

2. (Recording the Issuance of Common and Preferred Stock) Kathleen Battle Corporation was organized on January 1, 2003. It is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 500,000 shares of no par common stock with a stated value of $1 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $5
per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at $108
per share.

Apr. 1 Issued 24,000 shares of common stock for land. The
asking price of the land was $90,000; the fair market
value of the land was $80,000.

May 1 Issued 80,000 shares of common stock for cash at $7
per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in
payment of their bill of $50,000 for services rendered
in helping the company organize.

Sep. 1 Issued 10,000 shares of common stock for cash at $9
per share.
Nov. Issued 1,000 shares of preferred stock for cash at $112
per share.

Prepare the journal entries to record the above transactions.

Solution Preview

The journal entries are :

Since the started value is $1 and the issue price is $5, we need to show them separately
Jan. 10 Cash (80,000 X $5)................ 400,000
Common Stock (80,000 X $1).................. 80,000
Paid-in Capital in Excess of Stated
Value-Common Stock........................ 320,000
(80,000 X $4)

The par value of preferred stock is $100 and the isshue price is $108, so $8 would be the excess paid in capital

Mar. 1 Cash (5,000 X $108)........ 540,000
Preferred Stock (5,000 X $100)............... 500,000
Paid-in Capital in Excess of Par
...

Solution Summary

The solution explains the journal entries to be made for recording the Issuance of Common and Preferred Stock for Kathleen Battle Corporation

$2.19