Concept explainers
Prepare journal entries.
Explanation of Solution
Capital stock subscriptions:
Capital stock subscriptions are an agreement where in a buyer makes a contract to buy the shares of stock from a corporation at a particular price.
It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Accounting rules for Journal entries:
- To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
- To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains.
Record the journal entry:
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
June 30 | Organization Expenses (1) | 14,900 | |
Cash | 14,900 | ||
(To record corporate organization costs) |
Table (1)
- Organization expenses are component of
stockholders’ equity and it is decreased. Therefore, debit organization expenses account by $14,900. - Cash is an asset and it is decreased. Therefore, credit cash account by $14,900.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
July 15 | Cash | 82,000 | |
Common Stock | 80,000 | ||
Paid-In Capital in Excess of Par— Common Stock (2) | 2,000 | ||
(To record the stock issued at premium) |
Table (2)
- Cash is an asset and it is increased. Therefore debit cash account by $82,000.
- Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $80,000.
- Paid-In Capital in Excess of Par— Common Stock is a component of stockholders equity and it is increased. Therefore credit paid-In Capital in Excess of Par— Common Stock account by $2,000.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
August 1 | Common Stock Subscriptions Receivable | 101,500 | |
Common Stock Subscribed | 100,000 | ||
Paid-In Capital in Excess of Par— Common Stock (3) | 1,500 | ||
( To record the subscription received) |
Table (3)
- Common stock subscriptions receivable is a contra stockholders’ equity and it is increased. Therefore debit common stock subscriptions receivable account by $101,500.
- Common stock subscribed is a component of stockholders’ equity and it is increased. Therefore credit common stock subscribed account by $100,000.
- Paid-In Capital in Excess of Par— Common Stock is a component of stockholders’ equity and it is increased. Therefore, credit Paid-In Capital in Excess of Par— Common Stock account by $1,500.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
August 15 | Building | 104,800 | |
Common Stock | 100,000 | ||
Paid-In Capital in Excess of Par— Common Stock (4) | 4,800 | ||
(To record the stock issued at premium) |
Table (4)
- Building is an asset and it is increased. Therefore, debit truck account by $104,800.
- Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $100,000.
- Paid-In Capital in Excess of Par— Common Stock is a component of stockholders’ equity and it is increased. Therefore, credit Paid-In Capital in Excess of Par— Common Stock account by $4,800.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
August 31 | Cash | 51,500 | |
Common Stock Subscriptions Receivable | 51,500 | ||
( To record the payment of subscription) |
Table (5)
- Cash is an asset and it is increased. Therefore debit cash account by $51,500.
- Common stock subscriptions receivable is a contra stockholders’ equity and it is decreased. Therefore credit common stock subscriptions receivable account by $51,500.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 3 | Common Treasury Stock | 11,000 | |
Cash | 11,000 | ||
(To record the purchase of treasury stock) |
Table (6)
- Common treasury stock is a contra-stockholders’ equity and it is increased. Therefore, debit common treasury stock account by $11,000.
- Cash is an asset and it is decreased. Therefore, credit cash account by $11,000.
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 18 | Cash | 50,000 | |
Common Stock Subscriptions Receivable | 50,000 | ||
( To record the payment of subscription) |
Table (7)
- Cash is an asset and it is increased. Therefore debit cash account by $50,000.
- Common stock subscriptions receivables are a component of stockholders’ equity and it is increased. Therefore credit common stock subscriptions receivable account by $50,000.
Note: In this case, out of $101,500 subscription receivables for common stock, $51,500 is received previously and the final payment of $50,000
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 18 | Common Stock Subscribed | 100,000 | |
Common Stock | 100,000 | ||
( To record issuance of common stock) |
Table (8)
- Common stock subscribed is a component of stockholders’ equity and it is decreased. Therefore, debit common stock subscribed account by $100,000.
- Common stock is a component of stockholders’ equity and it is increased. Therefore, credit common stock account by $100,000.
Note: If the stock subscriptions are fully paid, the stock is issued by the corporation. Now the common stock subscribed account is debited and common stock is credited for the par amount of $100,000
Date | Account Titles and Explanation |
Debit (Amount in $) |
Credit (Amount in $) |
September 30 | Cash | 5,750 | |
Common Treasury Stock | 5, 500 | ||
Paid-In Capital from Sale of Treasury Stock (5) | 250 | ||
(To record sale of treasury stock) |
Table (9)
- Cash is an asset and it is increased. Therefore debit cash account by $5,750.
- Common treasury stock is a contra-stockholders’ equity and it is decreased. Therefore, credit common treasury stock account by $5,500.
- Paid-In Capital from Sale of Treasury Stock is a component of stockholders’ equity and it is increased. Therefore, credit Paid-In Capital from Sale of Treasury Stock account by $250.
Working note:
(1) Calculate the organization expenses:
(2) Calculate Paid-In Capital in Excess of Par— Common Stock:
(3) Calculate Paid-In Capital in Excess of Par— Common Stock:
(4) Calculate Paid-In Capital in Excess of Par— Common Stock:
(5) Calculate Paid-In Capital from Sale of Treasury Stock:
Want to see more full solutions like this?
Chapter 20 Solutions
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
- Entries for selected corporate transactions Nav-Go Enterprises Inc. produces aeronautical navigation equipment. Navo-Go Enterprises stockholders equity accounts, with balances on January 1, 20Y1, are as follows: The following selected transactions occurred during the year: Instructions 1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. 2. Journalize the entries to record the transactions, and post to the eight selected accounts. Assume that the closing entry for revenues and expenses has been made and post net income of 775,000 to the retained earnings account. 3. Prepare a statement of stockholders equity for the year ended December 31, 20Y1. Assume that net income was 775,000 for the year ended December 31, 20Y6. 4. Prepare the Stockholders Equity section of the December 31, 20Y1, balance sheet.arrow_forwardEntries for selected corporate transactions Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises stockholders equity accounts, with balances on January 1, 20Y6, are as follows: The following selected transactions occurred during the year: Instructions 1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. 2. Journalize the entries to record the transactions, and post to the eight selected accounts. Assume that the closing entry for revenues and expenses has been made and post net income of 1,125,000 to the retained earnings account. 3. Prepare a statement of stockholders equity for the year ended December 31, 20Y6. Assume that net income was 1,125,000 for the year ended December 31, 20Y6. 4. Prepare the Stockholders Equity section of the December 31, 20Y6, balance sheet.arrow_forwardes Kinkaid Company was incorporated at the beginning of this year and had a number of transactions. The following journal entries impacted its stockholders' equity during its first year of operations. Transaction a. b. C. d. General Journal Cash Common Stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Organization Expenses Common Stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Cash Accounts Receivable Building Notes Payable Common Stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Cash Common Stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Required: 2. How many shares of common stock are outstanding at year-end? 3. What is the total paid-in capital at year-end? 2. Number of outstanding shares 3. Total paid-in capital Debit 270,000 180,000 46,000 18,000 82,400 134,000 Credit 230,000 40,000 127,000 53,000 59,700 56,700 30,000 77,000 57,000arrow_forward
- Prepare journal entries to record the following transactions involving the short-term stock investments of Duke Co., all of which occurred during the current year. a. On March 22, purchased 1,000 shares of RPI Company stock at $10 per share. Duke’s stock investment results in it having an insignificant influence over RPI. b. On July 1, received a $1 per share cash dividend on the RPI stock purchased in part a. c. On October 8, sold 50 shares of RPI stock for $15 per share.arrow_forwardSubject: Financial Accounting and Reporting Required:a. Determine the number of shares issued and outstanding on: Jan1 Mar31 Jun30 Sep30 b. Prepare the journal entries for the above transactionsarrow_forwardKinkaid Company was incorporated at the beginning of this year and had a number of transactions. The following journal entries impacted its stockholders' equity during its first year of operations. Transaction a. General Journal Cash Common Stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Organization Expenses Common Stock, $25 Par Value. Paid-In Capital in Excess of Par Value, Common Stock Cash Accounts Receivable Building Notes Payable. Common stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Cash Common stock, $25 Par Value Paid-In Capital in Excess of Par Value, Common Stock Required: 2. How many shares of common stock are outstanding at year-end? 3. What is the total paid-in capital at year-end? 2. Number of outstanding shares 3. Total paid-in capital Debit 280,000 150,000 46,000 19,500 82,800 136,000 Credit 245,000 35,000 128,000 22,000 59,700 58,600 30,000 79,000 57,000arrow_forward
- The following selected transactions occurred for Corner Corporation:Feb. 1 Purchased 400 shares of the company’s own common stock at $20 cash per share;the stock is now held in treasury.July 15 Issued 100 of the shares purchased on February 1 for $30 cash per share.Sept. 1 Issued 60 more of the shares purchased on February 1 for $15 cash per share.Required:1. Show the effects of each transaction on the accounting equation.2. Give the indicated journal entries for each of the transactions.3. What impact does the purchase of treasury stock have on dividends paid?4. What impact does the reissuance of treasury stock for an amount higher than the purchaseprice have on net income?arrow_forwardRead Financial Statement Analysis Case 2: Wiebold. Answer questions a) b) & c) listed under Instructions. Case 2: Wiebold, Inc. The following note related to stockholders' equity was reported in Wiebold, Inc.'s annual report. On February 1, the Board of Directors declared a 3-for-2 stock split, distributed on February 22 to shareholders of record on February 10. Accordingly, all numbers of common shares, except unissued shares and treasury shares, and all per share data have been restated to reflect this stock split. On the basis of amounts declared and paid, the annualized quarterly dividends per share were $0.80 in the current year and $0.75 in the prior year. Instructions: (a) What is the significance of the date of record and the date of distribution? (b) Why might Wiebold have declared a 3-for-2 for stock split? (c) What impact does Wiebold's stock split have on (1) total stockholders' equity, (2) total par value, (3) outstanding shares, and (4)…arrow_forwardDiscuss the accounting treatment, if any, that should be given to each of the following items in computing earnings per share of ordinary shares for financial statement reporting. d. the declaration of current dividends on cumulative preference shares. e. the acquisition of some of the corporation's outstanding ordinary shares during the current fiscal year. the shares were classified as treasury shares. f. a 2-for-1 share split of ordinary shres during the current fiscal year. g. a provision created out of retained earnings for a contingent liability from a possible lawsuit.arrow_forward
- The income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows: Includes both state and federal taxes. Brief Exercise 15-20 Calculating the Average Common Stockholders Equity and the Return on Stockholders Equity Refer to the information for Somerville Company on the previous pages. Required: Note: Round answers to four decimal places. 1. Calculate the average common stockholders equity. 2. Calculate the return on stockholders equity.arrow_forwardComprehensive The shareholders equity section of Superior Corporations balance sheet as of December 31, 2018, is as follows: The following events occurred during 2019: Required: 1. Prepare journal entries for each of the above transactions. 2. Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2019. 3. Calculate Superior's legal capital at December 31, 2019.arrow_forwardThe income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows: Includes both state and federal taxes. Refer to the information for Somerville Company on the previous pages. Required: Note: Round answers to two decimal places. 1. Compute the number of common shares. 2. Compute earnings per share.arrow_forward
- College Accounting, Chapters 1-27 (New in Account...AccountingISBN:9781305666160Author:James A. Heintz, Robert W. ParryPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning