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Stock issue, asset purchase, inventory, rent, subscriptions

Prepare journal entries for each of the following unrelated transactions. You may omit explanations for the journal entries.

a. A firm issues 5,000 shares of $2 par value common stock in exchange for $20,000 cash.
b. A firm acquires a building with an appraised value of $100,000 for $30,000 cash and the assumption of a 25-year, 10% mortgage with a balance of $60,000.
c. Acquires $1,000 (list price) of inventory for $980 cash. The firm treats cash discounts as a reduction in acquisition cost.
d. A firm pays $1,000 to its landlord. The $1,000 represents the current month's rent plus the next month's rent payment in advance.
e. A publisher sells $2,000 in magazine subscriptions that will be filled over the next 12 months.

Solution Preview

a. A firm issues 5,000 shares of $2 par value common stock in exchange for $20,000 cash.

The common stock would be credited for the par value = 5,000X2=$10,000. The remaining amount would be paid in capital in excess of par. The journal entry is
Cash Dr 20,000
Common Stock Cr 10,000
Paid in Capital in excess of par Cr 10,000

b. A firm acquires a building with ...

Solution Summary

The solution explains journal entries relating to stock issue, asset purchase, inventory, rent and subscriptions

$2.19