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Chapter 13: Q4SE (page 708)

Journalizing issuance of stock—stated value

Nelson Corporation issued 9,000 shares of \(3 stated value common stock for \)11 per share on July 7. Record the stock issuance.

Short Answer

Expert verified

Cash will be debited with $99,000; Common stock- $3 Par value will be credited with $27,000 and Paid-in Capital in excess of shares will be credited with $72,000.

Step by step solution

01

Basic calculation

CashReceived=NumberofShares×ValuePerShare=9,000×$11=$99,000

CommonStock=NumberofShares×ParValuePerShare=9,000×$3=$27,000
02

Journal entry of issuance of common stock

Date

Transaction

Debit

Credit

Cash

$99,000

Common stock- $3 Par value

$27,000

Paid-in Capital in excess of shares

$72,000

To record common stock issued

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Most popular questions from this chapter

Question: Journalizing issuance of stock—at par and at a premium

Colorado Corporation has two classes of stock: common, \(3 par value; and preferred, \)30 par value.

Requirements

1. Journalize Colorado’s issuance of 4,500 shares of common stock for $6 per share.

Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity

Bianchi Company reported these figures for 2018 and 2017:

2018 2017

Income Statement—partial:

Net Income \( 34,380 \) 18,000

Dec. 31, 2018 Dec. 31, 2017

Balance Sheet—partial:

Total Assets \( 285,000 \) 280,000

Paid-In Capital:

Preferred Stock—11%, \(9 Par Value; 60,000 shares

authorized, 12,000 shares issued and outstanding

\) 108,000 \( 108,000

Common Stock—\)2 Par Value; 60,000 shares

authorized, 50,000 shares issued and outstanding

100,000 100,000

Paid-In Capital in Excess of Par—Common 14,000 14,000

Retained Earnings 60,500 38,000

Total Stockholders’ Equity \( 282,500 \) 260,000

Requirements

2. Compute Bianchi Company’s price/earnings ratio for 2018. Assume the company’s market price per share of common stock is $9. Round to two decimals.

Question: Identifying sources of equity, stock issuance, and dividends

Tillman Comfort Specialists, Inc. reported the following stockholders’ equity on its balance sheet at June 30, 2018:

Preferred Stock—5%, ? Par Value; 625,000 shares

authorized, 325,000 shares issued and outstanding

Paid-In Capital:

\( 1,300,000

1,350,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 2,600,000

Total Paid-In Capital 5,250,000

Retained Earnings 11,800,000

Total Stockholders’ Equity \) 17,050,000

Common Stock—$1 Par Value; 7,000,000 shares

authorized, 1,350,000 shares issued and outstanding

Requirements

3. Make two summary journal entries to record issuance of all the Tillman Comfort Specialists stock for cash. Explanations are not required.

Question: Copperhead Trust has the following classes of stock:

Preferred Stock—6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding

Common Stock—\)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding

Requirements

3. Assume the preferred stock is noncumulative and Copperhead passed the preferred dividend in 2016 and 2017. In 2018, the company declares cash dividends of $46,000. How much of the dividend goes to preferred stockholders? How much goes to common stockholders?

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.
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