Sapp Company is authorized to issue 20,000 shares of $5 par common stock and 5,0

Question

Sapp Company is authorized to issue 20,000 shares of $5 par common stock and 5,000 shares of 9%, $100 par preferred stock. It enters into the following transactions: a. Sells 7,000 shares of common stock at $42 per share. b. Acquires a building by paying $23,000 cash and issuing 2,000 shares of common stock and 600 shares of preferred stock. Common stock is currently selling at $46 per share; preferred stock has no current market value. The building is appraised at $1,800,000. c. Sells 1,000 shares of common stock at $45 per share. d. Sells 900 shares of preferred stock at $112 per share. e. Declares a two-for-one stock split on the common stock, reducing the par value to $2.50 per share. Prepare journal entries for each transaction.

Explanation / Answer

Date Particulars Dr/Cr Dr Amount Cr Amount - Cash/Bank A/c Dr    294,000.00 To Common Stock Capital Cr      35,000.00 To Securities Premium Account Cr    259,000.00 - Building A/c Dr    175,000.00 To Cash A/c Cr      23,000.00 To Common Stock Capital Cr      10,000.00 To Securities Premium Cr      82,000.00 To Preference Share Capital A/c Cr      60,000.00 ( Building will be recorded at the price paid and not at the market value) - Cash A/c Dr      45,000.00 To Common Stock Capital Cr        5,000.00 To Securities Premium Account Cr      40,000.00 - Cash A/c Dr    100,800.00 To Preference Share Capital A/c Cr      90,000.00 To Securities Premium Account Cr      10,800.00 - Memorandum entry ( 10,000 Shared of 5$ divided into 20,000 shared of 2.5$ each)

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