Kathleen Battle Corporation was organized on January 1, 2014. It is authorized t
ID: 2492622 • Letter: K
Question
Kathleen Battle Corporation was organized on January 1, 2014. It is authorized to issue 10,610 shares of 8%, $68 par value preferred stock, and 549,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.
Jan. 10 Issued 80,030 shares of common stock for cash at $6 per share. Mar. 1 Issued 5,080 shares of preferred stock for cash at $112 per share. Apr. 1 Issued 24,480 shares of common stock for land. The asking price of the land was $90,670; the fair value of the land was $80,030. May 1 Issued 80,030 shares of common stock for cash at $9 per share. Aug. 1 Issued 10,610 shares of common stock to attorneys in payment of their bill of $50,380 for services rendered in helping the company organize. Sept. 1 Issued 10,610 shares of common stock for cash at $11 per share. Nov. 1 Issued 1,950 shares of preferred stock for cash at $112 per share.Explanation / Answer
( being 1,950 shares of preferred stock issued for cash at $112 per share.)
Explanation to the above question:
What is a 'No-Par Value Stock'?
A no-par value stock is a stock that is issued without the specification of a par value indicated in the company's articles of incorporation or on the stock certificate itself.
Most shares issued today are classified as no-par or low-par value stock. No-par prices are determined by what investors are willing to pay for them in the market.
From an accounting standpoint, the par value of an issued share of common stock must be recorded in an account separate from the amount received over and above the amount of par value. For example, if a corporation issues 100 new shares of its common stock for a total of $2,000 and the stock's par value is $1 per share, the accounting entry is a debit to Cash for $2,000 and a credit to Common Stock—Par $100, and a credit to Paid-in Capital in Excess of Par for $1,900. In total the Cash account increased by $2,000 and the paid-in capital reported under stockholders' equity increased by a total of $2,000 ($100 + $1,900).
If a corporation is not required to have a par value or a stated value and the corporation issues 100 shares for $2,000, then the accounting entry will be a debit to Cash for $2,000 and a credit to Common Stock for $2,000.
If the issued stock does not have a par value, the proceeds from the issuance goes into just one paid-in capital account within stockholders' equity.
Journal Entries in the books of Kathleen Battle Corporation: (in $) Date Particulars Dr. Amount Cr. Amount Jan 10. Cash a/c.. Dr 480180 To, Common stock a/c 480180 ( being 80,030 shares of common stock issued for cash at $6 per share.) Mar 1. Cash a/c.. Dr 568960 To, Preferred Stock a/c 345440 To, Securities Premium a/c 223520 (being 5,080 shares of preferred stock issued for cash at $112 per share.) Apr 1. Land a/c.. Dr 80030 To, Common stock a/c 80030 (being 24,480 shares of common stock issued for land at a fair value $80,030.) May 1. Cash a/c.. Dr 720270 To, Common stock a/c 720270 ( being 80,030 shares of common stock issued for cash at $9 per share.) Aug 1. Outstanding Liabilities a/c.. Dr 50380 To, Common stock a/c 50380 (being 10,610 shares of common stock issued to attorneys in payment of their bill of $50,380 for services rendered in helping the company organize.) Sep 1. Cash a/c.. Dr 116710 To, Common stock a/c 116710 (being 10,610 shares of common stock issued for cash at $11 per share.) Nov 1 Cash a/c.. Dr 218400 To, Preferred Stock a/c 132600 To, Securities Premium a/c 85800( being 1,950 shares of preferred stock issued for cash at $112 per share.)
Explanation to the above question:
What is a 'No-Par Value Stock'?
A no-par value stock is a stock that is issued without the specification of a par value indicated in the company's articles of incorporation or on the stock certificate itself.
Most shares issued today are classified as no-par or low-par value stock. No-par prices are determined by what investors are willing to pay for them in the market.
From an accounting standpoint, the par value of an issued share of common stock must be recorded in an account separate from the amount received over and above the amount of par value. For example, if a corporation issues 100 new shares of its common stock for a total of $2,000 and the stock's par value is $1 per share, the accounting entry is a debit to Cash for $2,000 and a credit to Common Stock—Par $100, and a credit to Paid-in Capital in Excess of Par for $1,900. In total the Cash account increased by $2,000 and the paid-in capital reported under stockholders' equity increased by a total of $2,000 ($100 + $1,900).
If a corporation is not required to have a par value or a stated value and the corporation issues 100 shares for $2,000, then the accounting entry will be a debit to Cash for $2,000 and a credit to Common Stock for $2,000.
If the issued stock does not have a par value, the proceeds from the issuance goes into just one paid-in capital account within stockholders' equity.
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