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
Mar. 1 Issued 5,000 shares of preferred stock for cash at $108
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
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
Nov. Issued 1,000 shares of preferred stock for cash at $112
Prepare the journal entries to record the above transactions.
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
The solution explains the journal entries to be made for recording the Issuance of Common and Preferred Stock for Kathleen Battle Corporation