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Chapter 13: Q24E_1 (page 713)

Journalizing issuance of stock and preparing the stockholders’ equity section of the balance sheet

The charter of Evergreen Corporation authorizes the issuance of 900 shares of preferred stock and 1,400 shares of common stock. During a two-month period, Evergreen completed these stock-issuance transactions:

Mar. 23 Issued 230 shares of \(3 par value common stock for cash of \)15 per share.

Apr. 12 Received inventory with a market value of \(27,000 and equipment with a market value of \)19,000 for 320 shares of the \(3 par value common stock.

17 Issued 900 shares of 5%, \)20 par value preferred stock for $20 per share.

Requirements

1. Record the transactions in the general journal.

Short Answer

Expert verified

Cash is debited $3,450; Common stock$690 and Paid- in capital in excess of par $2,760 is credited.

Inventory and Equipment is debited $27,000 and $19,000; Common stock$960 and Paid- in capital in excess of par $45,040 is credited.

Cash is debited and Preferred stock is credited with $18,000.

Step by step solution

01

Basic Introduction-

Workings:

Common stock (230* $3)

Paid- in capital in excess of par ($3,450- $2,760)

Common stock (320* $3)

Paid- in capital in excess of par ($27,000+ $19,000- $960)

Preferred stock (900* $20)

02

Journal entries:

Date

Transaction

Debit

Credit

Mar. 23

Cash

$3,450

Common stock

$690

Paid- in capital in excess of par

$2,760

To record issue of common stock

Apr. 12

Inventory

$27,000

Equipment

$19,000

Common stock

$960

Paid- in capital in excess of par

$45,040

To record issue of common stock in exchange of asset

Apr. 17

Cash

$18,000

Preferred stock

$18,000

To record issue of preferred stock

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Most popular questions from this chapter

Computing dividends on preferred and common stock and journalizing

The following elements of stockholders’ equity are from the balance sheet of Sneed Marketing Corp. at December 31, 2017:

800,000

Preferred Stock—4%, \(2 Par Value; 80,000 shares

authorized, 55,000 shares issued and outstanding

Paid-In Capital:

\) 110,000

Stockholders’ Equity

Common Stock—\(0.10 Par Value; 8,750,000 shares

authorized, 8,000,000 shares issued and outstanding

Sneed paid no preferred dividends in 2017.

Requirements

1. Compute the dividends to the preferred and common shareholders for 2018 if total dividends are \)185,000 and assuming the preferred stock is noncumulative. Assume no changes in preferred and common stock in 2018.

Computing rate of return on common stockholders’ equity Wyler, Inc.’s 2018 balance sheet reported the following items—with 2017 figures given for comparison:

Total Assets Total Liabilities and Stockholders’ Equity Total Liabilities Total Stockholders’ Equity (all common) WYLER, INC. Balance Sheet As of December 31, 2018, and December 31, 2017 \( 39,600 December 31, 2018 17,100 22,500 18,500 14,962 December 31, 2017 \) 39,600 \( 33,462 \) 33,462 Net income for 2018 was $3,690.

Compute Wyler’s rate of return on common stockholders’ equity for 2018.

Computing price/earnings ratio Refer to the HEB data in Short Exercise S13-17. Assume the market price of HEB’s common stock is $19.50 per share. Compute HEB’s price/earnings ratio.

Eates Corp. issued 8,000 shares of no-par common stock for $13 per share.

Requirements

2. Which type of stock results in more total paid-in capital?

Accounting for a stock split

Decor and More Imports recently reported the following stockholders’ equity:

Common Stock—\(1 Par Value; 490,000,000 shares

authorized, 119,000,000 shares issued and outstanding

Paid-In Capital:

654,000,000

\) 119,000,000

267,000,000

Retained Earnings

Total Stockholders’ Equity \( 921,000,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 148,000,000

Total Paid-In Capital

Suppose Decor and More split its common stock 2-for-1 in order to decrease the market price per share of its stock. The company’s stock was trading at \)17 per share immediately before the split.

Requirements

1. Prepare the stockholders’ equity section of the Decor and More Imports balance sheet after the stock split.
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