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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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Heart Corporation entered into a subscription contract with several subscribers. The contract requires the subscribers to purchase 2,000 shares of $4 par common stock at a price of $20 per share. The contract requires a down payment of $5 per share, with the remaining $15 per share collectible at the end of one month. The stock will be issued to each subscriber upon full payment. Prepare the journal entry to record this transaction.

To determine

Prepare the journal entries to record the subscription contract.

Explanation

Subscription contract: It is a contract between the corporation and shareholders. As per this contract shareholders agree to purchase the shares of a corporation and pays at a future date. This contract creates the legal binding between the shareholder and corporation.

Prepare the journal entries to record the subscription contract:

Account title and ExplanationPost Ref.

Debit

($)

Credit

($)

Cash ($5×2,000shares) $10,000 
Subscription receivable ($15×2,000shares) 

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