Question

(Recording the Issuance of Common and Preferred Stock) Kathleen Battle Corporation was organized on January 1, 2017. 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 \(90,000; the fair value of the land was \)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.

Sept. 1 Issued 10,000 shares of common stock for cash at \(9 per share.

Nov. 1 Issued 1,000 shares of preferred stock for cash at \)112 per share.

Instructions

Prepare the journal entries to record the above transactions.

Short answer

The amount in excess of the par value of the shares is required to be transferred to paid-in capital in excess of the par value account.

Step-by-step solution

Meaning of Preferred Stocks

Preferred stock is a form of stock with exceptional privileges over normal stock. Inside the occasion of bankruptcy or merger, favored traders get monthly dividends and are paid first.

Preparing Journal Entries

Date	Particular	Debit $	Credit $
January 10	Cash A/c.	400,000
	Common stock		80,000
	Paid-in Capital in excess of stated Value-Common stock A/c.		320,000
	To record the issue of share.
March 1	Cash A/c.	540,000
	Preferred Stock		500,000
	Paid-in Capital in excess of par Preferred Stock A/c.		40,000
	To record the issue of share.
April 1	Land A/c.	80,000
	Common stock		24,000
	Paid-in Capital in excess of stated Value-Common stock A/c.		56,000
	To record the issue of share.
May 1	Cash A/c.	560,000
	Common stock		80,000
	Paid-in Capital in Excess of stated Value -Common stock A/c.		480,000
	To record the issue of share.
August 1	Organization Expense A/c.	50,000
	Common stock A/c.		10,000
	Paid-in capital in excess of Stated value- common stock A/c.		40,000
	To record the issue of share.
September 1	Cash A/c.	90,000
	Common Stock A/c.		10,000
	Paid-in Capital in excess of Stated value-common stock A/c.		80,000
	To record the issue of share.
November 1	Cash A/c.	112,000
	Preferred Stock A/c.		100,000
	Paid-in Capital in Excess of Par- Preferred stock A/c.		12,000
	To record the issue of share.