Question

Supper Company Ltd., reported the following stockholders’ equity on its balance sheet at Dec 31, 2017:...

Supper Company Ltd., reported the following stockholders’ equity on its balance sheet at Dec 31, 2017: Supper Company Ltd. Stockholders’ Equity Dec 31,2017 Paid-in Capital Preferred stock, 10%, ? par, 1,000,000 shares authorized, 100,000 shares issued $ 2,000,000 Common stock, par value $? per share, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding 4,000,000 Paid-in capital in excess of par—common 20,000,000 Total paid-in capital 26,000,000 Retained earnings 10,600,000 Total Stockholders’ equity $36,600,000 Requirements: 1. What is the par value per share of Supper’s preferred stock? (Show Workings) 2. What is the par value per share of Supper’s common stock? (Show Workings) 3. What is the selling per share for the $20,000,000 reported as paid-in capital in excess of par – common? (Show Workings) 4. Prepare two (2) summary journal entries to record issuance of all the Supper Company Ltd stock for cash. Explanations are not required.

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Answer #1

The computation is shown below:-

1. Par value of preferred stock
= Amount of preferred stock / Number of preferred shares issued and outstanding
= $2,000,000 / 100,000
= $20

2. Par value of common stock
= Amount of common stock / Number of common shares issued and outstanding
= $4,000,000 / 2,000,000
= $2

3. Selling price per share
= (Amount of common stock + Paid-in capital in excess of par-common) / Number of common shares issued and outstanding
= ($4,000,000 + $20,000,000) / 2,000,000
= $12

4. The Journal entry is shown below:-
Cash Dr, $2,000,000

To Preferred Stock $2,000,000
(Being issuance of preferred stock is recorded)

Cash Dr, $24,000,000

To Common stock $4,000,000

To Paid-in capital in excess of par-common $20,000,000
(Being issuance of common stock is recorded)

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