Q40PGA_3 - Horngren'S Financial And Managerial Accounting

Question

A Identifying sources of equity, stock issuance, and dividends

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

Preferred Stock—7%, ? Par Value; 625,000 shares

 authorized, 280,000 shares issued and outstanding

Paid-In Capital:

\( 1,400,000

1,340,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 2,900,000

Total Paid-In Capital 5,640,000

Retained Earnings 12,000,000

Total Stockholders’ Equity \) 17,640,000

Common Stock—$1 Par Value; 3,000,000 shares 

 authorized, 1,340,000 shares issued and outstanding

Requirements

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

Step-by-Step Solution

Answer

Cash will be debited by $1,400,000, and common stock will be credited by $1,400,000.

Cash will be debited by $1,340,000and preferred stock will be credited by $1,340,000.

Step 1: Journals of issuance of preferred stock-

Date	Transaction	Debit	Credit
	Cash	$1,400,000
	Preferred stock		$1,400,000

Step 2: Journals of issuance of common stock-

 

Date	Transaction	Debit	Credit
	Cash	$1,340,000
	Common stock		$1,340,000