# Spring Company is authorized to issue 500,000 shares of $2 par value common stock. In its first year, the company has the following transactions: Journalize the transactions and calculate how many shares of stock are outstanding at August 3. FindFindarrow_forward ### Principles of Accounting Volume 1 19th Edition OpenStax Publisher: OpenStax College ISBN: 9781947172685 #### Solutions Chapter Section FindFindarrow_forward ### Principles of Accounting Volume 1 19th Edition OpenStax Publisher: OpenStax College ISBN: 9781947172685 Chapter 14, Problem 6EB Textbook Problem 1 views ## Spring Company is authorized to issue 500,000 shares of$2 par value common stock. In its first year, the company has the following transactions:Journalize the transactions and calculate how many shares of stock are outstanding at August 3.

To determine

To journalize:

The transactions relating to the issuance of shares and calculating the number of shares outstanding on August 3.

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 shares:

 Date Account Debit($) Credit($) March, 1 Cash (40,000 shares×$9.75) 390,000 Common stock (40,000 shares×$2) 80,000 ….. Additional Paid-in Capital from Common Stock (40,000 shares×$7.75) 310,000 (To record issue of shares for cash) Table (1) • Cash is an asset and it is increased by$390,000. Therefore, cash account is debited with $390,000. • Common stock is a capital account and it is increased by$80,000. Therefore, common stock account is credited with $80,000. • Additional Paid-in Capital from Common Stock is a capital account and it is increased by$310,000. Therefore, additional paid-in capital from common stock is credited with $310,000. Record issuance of common stock:  Date Account Debit($) Credit($) April, 10 Legal services expense 10,000 Common stock (1,000 shares×$2) 2,000 Additional Paid-in Capital from Common Stock (1,000 shares×$8) 8,000 (To record issue of shares in exchange of legal services.) Table(2) • Legal sevices is an expense and it is increased by$10,000. Therefore, legal services account is debited with $10,000. • Common stock is a capital account and it is increased by$2,000. Therefore, common stock account is credited with $2,000. • Additional Paid-in Capital from Common Stock is a capital account and it is increased by$8,000. Therefore, additional paid-in capital from common stock is credited with \$8,000

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