# St. Marie Company is authorized to issue 1,000,000 shares of $5 par value preferred stock, and 5,000,000 shares of$1 stated value common stock. During the year, the company 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 9EA
Textbook Problem
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## St. Marie Company is authorized to issue 1,000,000 shares of $5 par value preferred stock, and 5,000,000 shares of$1 stated value common stock. During the year, the company has the following transactions:Journalize the transactions.

To determine

To journalize:

The transactions relating to the issuance of 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 issue of shares:

 Date Account Debit($) Credit($) January, 31 Cash 1,400,000 Common stock (140,000×$1) 140,000 Additional Paid-in Capital from Common Stock (140,000×$9) 1,260,000 To record the issue of stock for cash)

Table (1)

• Cash is an asset and it is increased by $1,400,000. Therefore, cash account is debited with$1,400,000.
• Common stock is a capital account and it is increased by $140,000. Therefore, common stock account is credited with$140,000.
• Additional Paid-in Capital from Common Stock is a capital account and it is increased by $1,260,000. Therefore, Additional Paid-in Capital from Common Stock account is credited with$1,260,000.

Record issue of shares:

 Date Account Debit($) Credit($) June,10 Land 850,000 Common stock (160,000×$1) 160,000 Additional Paid-in Capital from Common Stock ($850,000−$160,000) 690,000 (To record the issue of stock in for land) Table (2) • Land is an asset and it is increased by$850,000

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