Moonwalker Corporation issued 2,330 shares of its $10 par value common stock for
ID: 2422468 • Letter: M
Question
Moonwalker Corporation issued 2,330 shares of its $10 par value common stock for $61,990. Moonwalker also incurred $1,550 of costs associated with issuing the stock.
Prepare Sprinkle’s journal entries to record these transactions using the cost method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
7/1/14
9/1/14
11/1/14
Date
Account Titles and Explanation
Debit
Credit
7/1/14
9/1/14
11/1/14
Explanation / Answer
Date
Account Titles and Explanation
Debit
Credit
7/1/14
Cash A/c Dr.
$61,990
To Common Stock A/c
$23,300
To Additional Paid in Capital A/c
$38,690
(2,330 shares of $10 par value issued at a price of $61,990)
7/1/14
Additional paid in capital A/c Dr.
$1,550
To Cash A/c
$1,550
(Stock issuance costs incurred)
9/1/14
No Entry
0
No Entry
0
11/1/14
No Entry
0
No Entry
0
The issue of stock and costs incurred are assumed to happen on 07/01/14.
Any amount received above the par value should be treated as additional paid in capital. Here par value of stocks is $2,330 * 10 = $23,300. As the amount received is $61,990. So additional paid in capital is $61,990 - $23,300 = $38,690
Stock issuance costs are debited to the Additional paid in capital. Alternatively, it can be debited as intangible assets and amortize over a period of time. Both approaches are acceptable under GAAP.
Date
Account Titles and Explanation
Debit
Credit
7/1/14
Cash A/c Dr.
$61,990
To Common Stock A/c
$23,300
To Additional Paid in Capital A/c
$38,690
(2,330 shares of $10 par value issued at a price of $61,990)
7/1/14
Additional paid in capital A/c Dr.
$1,550
To Cash A/c
$1,550
(Stock issuance costs incurred)
9/1/14
No Entry
0
No Entry
0
11/1/14
No Entry
0
No Entry
0
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