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Entries for issuing stock On May 23, Stoltz Realty Inc. issued for cash 80,000 shares of no-par common stock (with a stated value of $3) at $12. On July 6, Stoltz Realty Inc. issued at par value 18,000 shares of preferred 1% stock, $50 par for cash. On September 15, Stoltz Realty Inc. issued for cash an additional 50,000 shares of no-par common stock (with a stated value of $3) for $15. Journalize the entries to record the May 23, July 6, and September 15 transactions.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 2PEA
Textbook Problem
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Entries for issuing stock

On May 23, Stoltz Realty Inc. issued for cash 80,000 shares of no-par common stock (with a stated value of $3) at $12. On July 6, Stoltz Realty Inc. issued at par value 18,000 shares of preferred 1% stock, $50 par for cash. On September 15, Stoltz Realty Inc. issued for cash an additional 50,000 shares of no-par common stock (with a stated value of $3) for $15.

Journalize the entries to record the May 23, July 6, and September 15 transactions.

To determine

Journalize the entries to record the transactions made on May 23, July 6, and September 15.

Explanation of Solution

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.

Record the issuance of stated value common stock.

DateAccount Titles and ExplanationDebit ($)Credit ($)
May 23Cash (80,000 shares×$12)960,000
       Common Stock (80,000 shares×$3)240,000

      Paid-in Capital in Excess of Stated value

      ($960,000$240,000)

720,000
(To record issuance of 80,000 shares in excess of stated value 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.
  • Paid-in Capital in Excess of Stated Value is a stockholders’ equity account and the amount is increased due to increase in capital. Therefore, credit Paid-in Capital in Excess of Stated Value account with the amount of cash received in excess of common stock value.

Record the journal entry for the issuance of preferred stock

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Chapter 13 Solutions

Financial Accounting
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