# Autumn Corporation was organized in August. It is authorized to issue 100,000 shares of $100 par value 7% preferred stock. It is also authorized to issue 500,000 shares of$5 par value common stock. During the year, the corporation had the following transactions: Journalize the transactions.

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 14, Problem 3PB
Textbook Problem
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## Autumn Corporation was organized in August. It is authorized to issue 100,000 shares of $100 par value 7% preferred stock. It is also authorized to issue 500,000 shares of$5 par value common stock. During the year, the corporation had the following transactions:Journalize the transactions.

To determine

To journalize:

The transactions relating to issue of equity and preference shares.

Introduction:

Common stock is owners’ capital contributed in the business. Holders of the common stock reserve right to participate in voting. Profits are distributed to common stock holders and they receive assets in the event of dissolution of the company.

### Explanation of Solution

Record issuance of preference stock:

 Date Account Title and Explanation Post Ref. Debit ($) Credit($) 22nd, August Cash ($105×2,000) 210,000 Additional paid-in capital from preference stock ($5×2,000) 10,000 Preference Stock ($100×2,000) 200,000 (To record issuance of$100 par value preference stock for cash.)

Table (1)

• Cash is an asset and it is increased by $210,000. Therefore, cash account is debited with$210,000.
• Additional paid-in capital from preference stock is capital and it is increased by $10,000. Therefore, Additional paid-in capital from preference stock is credited with$10,000.
• Preference Stock is capital and it is increased by $200,000. Therefore, Preference Stock is credited with$200,000.

Record issuance of common stock:

 Date Account Title and Explanation Post Ref. Debit ($) Credit($) 3rd, September Cash ($13.25×80,000) 1,060,000 Additional paid-in capital from common stock ($8.25×80,000) 660,000 Common Stock ($5×80,000) 400,000 (To record issuance of$5 par value common stock for cash.)

Table (2)

• Cash is an asset and it is increased by $1,060,000. Therefore, cash account is debited with$1,060,000.
• Additional paid-in capital from common stock is capital and it is increased by $660,000. Therefore, Additional paid-in capital from common stock is credited with$660,000.
• Common Stock is capital and it is increased by $400,000. Therefore, Common Stock is credited with$400,000.

Record issuance of common stock:

 Date Account Title and Explanation Post Ref. Debit ($) Credit($) 11th, October Land 156,000 Additional paid-in capital from common stock ($7×13,000) 91,000 Common Stock1 ($5×13,000) 65,000 (To record issuance of $5 par value common stock for land.) Table (3) • Land is an asset and it is increased by$156,000

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