Textbook Problem

Issuing Common and Preferred Stock

Klaus Herrmann, a biochemistry professor, organized Bioproducts Inc. early this year. The firm will manufacture antibiotics using gene splicing technology. Byproducts’ charter authorizes the firm to issue 10,000 shares of 7%, S70 par preferred stock and 150,000 shares of $5 par common stock. During the year, the firm engaged in the transactions listed below.

1. Issued 50,000 common shares to Klaus Herrmann in exchange for $550,000 cash.
2. Sold 8,000 common shares to a potential customer for $12 per share.
3. Issued 4,000 shares of preferred stock to a venture capital firm for $85 per share.
4. Gave 100 shares of common stock to Margaret Robb, a local attorney, in exchange for Margaret’s work in arranging for the firm’s incorporation. Margaret usually charges $1,200 for comparable work.

Required:

Prepare a journal entry for each of these transactions