# EllaJane Corporation was organized several years ago and was authorized to issue 4,000,000 shares of $50 par value 6% preferred stock. It is also authorized to issue 1,750,000 shares of$1 par value common stock. In its fifth year, the corporation has 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 6PA
Textbook Problem
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## EllaJane Corporation was organized several years ago and was authorized to issue 4,000,000 shares of $50 par value 6% preferred stock. It is also authorized to issue 1,750,000 shares of$1 par value common stock. In its fifth year, the corporation has the following transactions:Journalize the transactions.

To determine

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.

To journalize:

The transactions relating to the issuance and re-issuance of shares.

### Explanation of Solution

Record issuance of shares:

 Date Account Debit ($) Credit ($) March, 1 Common Stock (1,000×$1) 1,000 Additional Paid-in Capital from Common Stock (1,000×$10) 10,000 Cash 11,000 (To record purchase of stock for cash)

Table (1)

• Common stock is a capital account and it is decreased by $1,000. Therefore, common stock is debited with$1,000.
• Additional Paid-in Capital from Common Stock is a capitalaccount and it is decreased by $10,000. Therefore, Additional Paid-in Capital from Common Stock is debited with$10,000.
• Cash is an asset and it is decreased by $11,000. Therefore, cash account is credited with$11,000.

Record re-issuance of shares:

 Date Account Debit ($) Credit ($) April, 10 Cash 7,500 Treasury stock (500×$1) 500 Additional Paid-in Capital from Treasury stock (500×$14) 7,000 (To record the sale of 500 shares of treasury stock above cost)

Table (2)

• Cash is an asset and it is increased by \$7,500

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