During its first year of operations, Eastern Data Links Corporation entered into

Question

During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholders’ equity. The articles of incorporation authorized the issue of 8 million common shares, $1 par per share, and 1 million preferred shares, $50 par per share.

Issued 380,000 of its common shares in exchange for equipment for which the cash price was known to be $3,688,000.

During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholders’ equity. The articles of incorporation authorized the issue of 8 million common shares, $1 par per share, and 1 million preferred shares, $50 par per share.

Explanation / Answer

Date Account title Debit credit feb 12 cash   [2*9 ] 18 common stock    [2* 1] 2 Paid in capital in excess of par -common stock 16 [being common stock issued] feb 13 Legal expenses    [40000*9] 360000 common stock     [40000*1] 40000 Paid in capital in excess of par -common stock 320000 [being shares offered for legal services ] feb 13 cash 945000 common stock    [80000*1] 80000 paid in capital in excess of par -common stock [80000*8] 640000 Preferred stock     [4000*50] 200000 paid in capital in excess of par -preferred 25000 [being stock issued for cash ] nov 15 Equipment 3688000 common stock 380000 Paid in capital in excess of par -common stock 3308000

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