Question

During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue 100,000,060 common shares, $1 par per share. Required: Prepare the appropriate journal entries to record each transaction. Jan. 9 Issued 50,000,000 common shares for $18 per share. Mar. 11 Issued 4,500 shares in exchange for custom-made equipment. McCollum’s shares have traded recently on the stock exchange at $18 per share. Part B A new staff accountant for the McCollum Corporation recorded the following journal entries during the second year of operations. McCollum retires shares that it reacquires (restores their status to that of authorized but unissued shares). Date General Journal Debit Credit Jan. 12 Land 5,000,000 Paid-in capital—donation of land 5,000,000 Sept. 1 Common stock 2,000,000 Retained earnings 44,000,000 Cash 46,000,000 Dec. 1 Cash 24,000,000 Common stock 1,000,000 Gain on sale of previously issued shares 23,000,000

Answer 1

Answer:

cash       900,000,000 debit

  common stock          50,000,000 credit

  additional paid-in    850,000,000 credit

---   Jan 9th issuance   ---

Equipment       81,000 debit

    Common Stock          4,500 credit

   Addtional paid-in      76,500 credit

---    March 11th issuance ---

Equity at end of Year 1:

  common stock          50,004,500 credit

  additional paid-in    850,076,500 credit

Explanation:

cash proceeds: 50 millions x 18 dolllars = 900 millions

      face value:  50 millions x  1 dollars   =  50 million

             additional paid-in                           850 millions

Equipment: 4,500 x 18 = 81,000

face value  4,500 x 1 =      4,500

addiional                          76,500

Equity at year-end will be the sum of both