Question

Journalizing issuance of stock and preparing the stockholders’ equity section of the balance sheet

The charter for ASAP-TV, Inc. authorizes the company to issue 100,000 shares of \(5, no-par preferred stock and 500,000 shares of common stock with \)1 par value. During its start-up phase, ASAP-TV completed the following transactions:

Sep. 6 Issued 550 shares of common stock to the promoters who organized the corporation, receiving cash of \(16,500.

12 Issued 400 shares of preferred stock for cash of \)23,000.

14 Issued 1,500 shares of common stock in exchange for land with a market value of $17,000.

Requirements

1. Record the transactions in the general journal.

Short answer

Cash is debited by $16,500,common stock credited by $550and Paid- in capital in excess of par is credited by $15,950.

Cash is debited by $23,000, preferred stock credited by $2,000and Paid- in capital in excess of par is credited by $21,000.

Land is debited by $17,000, common stock credited by $1,500 andPaid- in capital in excess of par is credited by $15,500.

Step-by-step solution

Basic calculation

$\begin{array}{c}\mathrm{CommonStock}=\mathrm{NumberofShares}\times \mathrm{ParValue}\\ =550\times \$1\\ =\$550\end{array}$

$\begin{array}{c}\mathrm{PreferredStock}=\mathrm{NumberofShares}\times \mathrm{ParValue}\\ =400\times \$5\\ =\$2,000\end{array}$

role="math" localid="1656923885502" $\begin{array}{c}\mathrm{CommonStockforLand}=\mathrm{NumberofShares}\times \mathrm{ParValue}\\ =1,500\times \$1\\ =\$1,500\end{array}$

Journal entries

Date	Transaction	Debit	Credit
Sep 6	Cash	$16,500
	Common stock		$550
	Paid- in capital in excess of par		$15,950
	To record issue of common stock
Sep 12	Cash	$23,000
	Preferred stock		$2,000
	Paid- in capital in excess of par		$21,000
	To record issue of preferred stock
Sep 14	Land	$17,000
	Common stock		$1,500
	Paid- in capital in excess of par		$15,500
	To record issue of common stock in exchange of asset