ABC Corporation is authorized to issue 50,000 shares of $50 par value, preferred
ID: 2381866 • Letter: A
Question
ABC Corporation is authorized to issue 50,000 shares of $50 par value, preferred stock and 750,000 shares of $5 par value common stock. Please prepare journal entries to record the following transactions that occurred during the first year of operations:
January 1 Exchanged 500 shares of common stock for $ 2,500 worth of services incurred to get the corporation organized.
February 1 Sold 96,000 shares of common stock for $8 per share, cash.
February 10 Sold 25,000 shares of preferred stock for $ 75 per share, cash.
March 1 `Sold 35,000 shares of common stock for $10 per share, cash.
March 31 `Sold 10,000 shares of preferred stock for $85 per share, cash.
Explanation / Answer
Jan 1 Management expenses....Dr 2500
To Common stock 2500
Feb 1 Cash.....Dr 768000
To Common stock 480000
To securities premiuim 288000
Feb 10 Cash.....Dr 1875000
to preferred stock 1875000
(Assumed to be issued at par as no information is available)
March 1 Cash.....Dr 350000
To Common stock 175000
To securities premiuim 175000
March 31 Cash.....Dr 850000
to preferred stock 750000
To securities premiuim 100000
(assumed that the par value of preferred stock is $75)