Question

Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred:

a. Collected $46 cash per share from four individuals and issued 5,600 shares of common stock to each
b. Issued 6,600 shares of common stock to an outside investor at $46 cash per share
c. Issued 8,600 shares of preferred stock at $19 cash per share.

Prepare the journal entries indicated for each of these transactions.

Answer 1

Answer and Explanation :

As per the data given in the question,

Ava school of learning

Journal entries

a. Cash A/c Dr. $1,030,400      (5600 shares × 4 × $46)

        To Common stock Cr.  $1,030,400

(Being the issue of common stock is recorded)

b. Cash A/c Dr. $303,600     (6600 share × $46)

         To  Common Stock Cr.  $303,600

(Being the issue of common stock is recorded)

c. Cash A/c Dr. $163,400          (8,600 × $19)

      To Preferred stock Cr.  $86,000    (8,600 × $10)

      To Additional paid in capital Cr $77,400

(Being the issue of preferred stock is recorded)

Only these entries are passed

Answer 2

Based on the information given the appropriate journal entries to record the transactions are:

Ava School of Learning Journal entries

a. Debit Cash $1,030,400

(5600 shares×4× $46)

Credit Common stock $1,030,400

(To record common stock)

b. Debit Cash $303,600    

(6600 share ×$46)

Credit Common Stock $303,600

(To record common stock )

c. Debit Cash $163,400          

(8,600 × $19)

Credit Preferred stock $86,000  

(8,600 × $10)

Credit  Additional paid in capital  $77,400

[($19-$10)×8,600]

(To record preferred stock)

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