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.

2. Prepare the stockholders’ equity section of the ASAP-TV balance sheet atSeptember 30, 2018, assuming ASAP-TV, Inc. had net income of \)38,000 for the month.

Short answer

Total Shareholders’ Equity of the company is $92,5000.

Step-by-step solution

Basic calculation

$\begin{array}{c}\mathrm{TotalCommonStock}=\mathrm{NumberofShares}\times \mathrm{ParValue}\\ \mathbf{=}\mathbf{(}\mathbf{1}\mathbf{,}\mathbf{500}\mathbf{+}\mathbf{550}\mathbf{)}\mathbf{\times }\mathbf{\$}\mathbf{1}\\ =\$2,050\end{array}$

$\begin{array}{c}\mathbf{PaidinCapitalinExcessofPar}\mathbf{=}\mathbf{\left(}\begin{array}{c}\mathbf{PaidinCapitalinExcessofParof}\mathbf{550}\mathbf{Shares}\\ \mathbf{+}\mathbf{PaidinCapitalinExcessofParof}\mathbf{1}\mathbf{,}\mathbf{500}\mathbf{Shares}\end{array}\mathbf{\right)}\\ =\$15,950+\$15,500\\ =\$31,450\end{array}$

Partial Balance Sheet

WPAC TV Inc Partial Balance sheet
Shareholders’ equity section
Common stock	$2,050
Paid-in capital, in excess of par- common stock	$31,450
Paid-in capital, in excess of par- preferred stock	$21,000
Retained earnings	$38,000
Total Shareholders’ Equity	$92,500