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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Issuing par stock
On January 29. Quality Marble Inc.. a marble contractor, issued 75.000 shares of $10 par common stock for cash at $23 per share, and on May 31. it issued 100.000 shares of $-i par preferred stuck for cash at $6 per sliare.
a. Illustrate the effects on the accounts and financial statements of the January 29 and May 31 transations.
b. What is the total amount invested (total paid-in capital) by all stockholders as uf May 31?

To determine

Concept Introduction:

Stocks (Common Stock and Preferred Stock):

There are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the preference shares issued. Preference shares are given preference in payment of dividends and repayment of capital. Common shareholders get the inbuilt right to vote in decisions of the company and preference shareholders generally do not get this right but they may get voting rights with special provisions.

Requirement-1:

To Indicate:

The effect of the journal entries on the accounts and financial statements

Explanation

The effect of the journal entries on the accounts and financial statements is explained as follows:

    Date Account Account TypeFinancial Statement Amount Increase or Decrease
    Jan. 29Cash AssetBalance sheet $ 1,725,000 Increase
    (75000*$23)
    Paid in Capital in excess of Par-Common Stock EquityBalance sheet $ 975,000 Increase
    (1725000-750000)
    Common Stock EquityBalance sheet $ 750,000 Increase
To determine

Concept Introduction:

Stocks (Common Stock and Preferred Stock):

There are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the preference shares issued. Preference shares are given preference in payment of dividends and repayment of capital. Common shareholders get the inbuilt right to vote in decisions of the company and preference shareholders generally do not get this right but they may get voting rights with special provisions.

Requirement-2:

To Indicate:

The amount of total paid in capital as on May. 31

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