ABC Corporation is authorized to issue 50,000 shares of $50 par value, preferred

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)

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