Donahue Corporation is authorized by its charter from the state of Illinois to i

Question

Donahue Corporation is authorized by its charter from the state of Illinois to issue 2000 shares of preferred stock with a 7 percent dividend rate and a par value of $30 per share and 125,000 shares of common stock with a par value of $0.01 per share. On January 1, 2011, Donahue Corporation issues 1300 shares of preferred stock at $35 per share and 84,000 shares of common stock at $12.50 per share. Prepare the journal entry to record the issuance of the common stock DEBIT CREDIT CREDIT Prepare the journal entry to record the issuance of the preferred stock DEBIT CREDIT CREDIT

Explanation / Answer

Answer

Prepare the journal entry to record the issuance of the common stock

January 1, 2011

Cash A/c Dr. 1050000      (84000 * 12.50)

             To Common stock paid in capital A/c Cr. $ 840 (84000 * 0.01)

             To paid in capital in excess of par-common A/c Cr. $ 1049160 (84000 * 12.49)

Prepare the journal entry to record the issuance of the preferred stock

January 1, 2011

Cash A/c Dr. $ 45500   (1300 * $ 35)

             To Preferred stock paid in capital A/c Cr. $ 39000   (1300*30)

             To Paid in capital in excess of par-preferred A/c Cr. $ 6500 (1300*5)

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