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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for issuing stock

On January 22, Zentric Corporation issued for cash 180,000 shares of no-par common stock at $4. On February 14, Zentric Corporation issued at par value 44,000 shares of preferred 2% stock, $55 par for cash. On August 30, Zentric Corporation issued for cash 9,000 shares of preferred 2% stock, $55 par at $60.

Journalize the entries to record the January 22, February 14, and August 50 transactions.

To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock.

To Journalize: The entries to record the transactions made on January 22, February 14, and August 30.

Explanation

Record the issuance of stated value common stock.

Date Account Titles and Explanation Debit ($) Credit ($)
January 22 Cash 720,000
      Common Stock (180,000 shares×$4) 720,000
(To record issuance of 180,000 shares at $4 per share)

Table (1)

  • Cash is an asset account. The amount is increased, because cash is received upon stock issued. Therefore, debit Cash account with the amount of cash received.
  • Common Stock is a stockholders’ equity account and the amount is increased due to issuance of common stock. Therefore, credit Common Stock account with the value of common stock.

Record the journal entry for the issuance of preferred stock.

Date Account Titles and Explanation Debit ($) Credit ($)
February 14 Cash (44,000 shares×$55) 2,420,000
   Preferred Stock                         2,420,000
(To record the issuance of preferred stock in excess of par value)

Table (2)

  • Cash is an asset account. The amount is increased, because cash is received upon stock issued

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