Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby,

Question

Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,000,000 shares of common stock with a par of $1.

Journalize the entries to record the following transactions affecting stockholders’ equity, which were completed during the first year of operations.

Jan. 2 Issued 100,000 shares of stock at par to Paul Glenn for cash. 5 Issued 3,000 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation, and issued 45,000 shares of stock at par to Michele Kirby for cash. 8 Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for $180,000 for 20 years at 6%, and there is accrued interest of $5,200 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $60,000 and the building at $225,000 and that Gretchen Northway’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.

Chart of Accounts:

ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 191 Building 192 Accumulated Depreciation-Building

Explanation / Answer

Cash A/c Dr.

To Common Srock A/c

(Issued 100,000 shares of stock at par to Paul Glenn for cash)

100000

100000

Goodwill A/c Dr.

To Common Stock A/c

(Issued 3,000 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation).

3000

3000

Cash A/c Dr.

To Common stock A/c

(issued 45,000 shares of stock at par to Michele Kirby for cash)

45000

Land A/c Dr.

Building A/c Dr.

To Gretchen Northway

(Purchased land and building from Gretchen Northway)

60000

225000

285000

Gretchen Northway A/c Dr.

To Common stock A/c

( Gretchen Northway’s equity will be exchanged for stock at par)

285000

Date Particulars Debit (Dr.) Credit (Cr.) Jan 2

Cash A/c Dr.

To Common Srock A/c

(Issued 100,000 shares of stock at par to Paul Glenn for cash)

100000

100000

Jan 5

Goodwill A/c Dr.

To Common Stock A/c

(Issued 3,000 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation).

3000

3000

Jan 5

Cash A/c Dr.

To Common stock A/c

(issued 45,000 shares of stock at par to Michele Kirby for cash)

45000

45000 Jan 8

Land A/c Dr.

Building A/c Dr.

To Gretchen Northway

(Purchased land and building from Gretchen Northway)

60000

225000

285000

Jan 8

Gretchen Northway A/c Dr.

To Common stock A/c

( Gretchen Northway’s equity will be exchanged for stock at par)

285000

285000

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