Garcia Corporation recently hired a new accountant with extensive experience in
ID: 2500389 • Letter: G
Question
Garcia Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.
On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.
Explanation / Answer
The correct journal entries have been given below:
May 2:
As given in the explanation, the shares have been issued at higher than par value. The excess value so received will be credit to Paid in Capital in Excess of Par - Common Stock, which has not been recorded in the journal entry provided in the question. The common stock account will be credited with total par value only. The correct journal entry is given below:
________
May 10:
As given in the explanation, the preferred shares have been issued at higher than par value. The excess value so received will be credit to Paid in Capital in Excess of Par - Preferred Stock, which has not been recorded in the journal entry provided in the question. The preferred stock account will be credited with total par value only. The correct journal entry is given below:
________
May 15:
Since, the treasury shares have been bought, we will have to debit the Treasury Stock account. The correct journal entry is as follows:
Account Titles Debit Credit Cash (7,670*14) $107,380 Common Stock (7,670*10) $76,700 Paid in Capital in Excess of Par – Common Stock (7,670*4) $30,680Related Questions
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