chp 12-08 instructions Professional Products Inc., a wholesaler of office produc

Question

chp 12-08
instructions

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 26,000 shares of preferred 2% stock, $100 par and 550,000 shares of $10 par common stock. The following selected transactions were completed during the first year of operations:

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

ACCOUNTING EQUATION

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Effect of Stock Split

Willey’s Grill & Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Southwest. Willey’s Grill & Restaurant, which had 72,000 shares of common stock outstanding, declared a 4-for-1 stock split.

a. What will be the number of shares outstanding after the split?
_____________shares

b. If the common stock had a market price of $156 per share before the stock split, what would be an approximate market price per share after the split?
$_______ per share

Feb. 5 Issued 247,000 shares of common stock at par for cash. 5 Issued 300 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation. Apr. 9 Issued 69,100 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $153,500, $488,060 and $160,000 respectively. June 14 Issued 15,000 shares of preferred stock at $109 for cash.

Explanation / Answer

1)

2)

number of shares outstanding after the split = 72000*4=288000 shares

market price per share after the split = 156*1/4 = $ 39 per share

Date Account Debit credit Feb 5 cash 2470000 common stock [247000*10] 2470000 Feb 5 Organisation expense/legal expense 3000 cash [300*10] 3000 Apr 9 Land 153500 Building 488060 Equipment 160000 common stock [69100*10] 691000 Paid-In Capital in Excess of Par-Common Stock 110560 June 14 cash [15000*109] 1635000 Paid-In Capital in Excess of Par-Preferred Stock 135000 Preferred Stock [15000*100] 1500000

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