Q24E_1 - Horngren'S Financial And Managerial Accounting

Question

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.

Step-by-Step Solution

Answer

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 1: 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)

 

Step 2: 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