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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Subscriptions On August 3, 2019, the date of incorporation, Quinn Company accepts separate subscriptions for 1,000 shares of $100 par preferred stock at $104 per share and 9,000 shares of 110-par, no-stated-value common stock for $22 per sl1are. The subscription contracts require a 10% down payment, with the balance due by November 1, 2019. Shares are issued to each subscriber upon full payment. On November 1, Quinn received the remaining balances for the shares of preferred stock and common stock.

Required:

Prepare journal entries to record all the transactions related to:

  1. 1. the preferred stock
  2. 2. the common stock

1.

To determine

Prepare the journal entries to record the transactions related to preferred stock.

Explanation

Preferred stock: Preferred stock is the cash raised by the company by issuing preferred shares. This investment fetches a preferential right for dividend for the preferred stockholders over the common stockholders.

Prepare the journal entries to record the transactions related to preferred stock:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
August 3Cash (1,000×$104×0.10) 10,400 
Subscriptions Receivable ($104,000$10,400) 93,600 
            Preferred Stock Subscribed  100,000
            Additional Paid-in Capital on Preferred Stock   4,000
 (To record subscriptions accepted for preferred stock)   
     
November 1Cash (1,000×$104×0

2.

To determine

Prepare the journal entries to record the transactions related to Common stock.

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