Question

Alpha Sounds Corp., an electric guitar retailer, was organized by Michele Kirby, Paul Glenn, and Gretchen Northway. The charter authorized 1,100,000 shares of common stock with a par of $1.

The following transactions affecting stockholders’ equity were completed during the first year of operations:

Jan.

2

Issued 119,000 shares of stock at par to Paul Glenn for cash.

5

Issued 3,500 shares of stock at par to Michele Kirby for promotional services provided in connection with the organization of the corporation and issued 48,600 shares of stock at par to Michele Kirby for cash. (record as two separate transactions.)

8

Purchased land and a building from Gretchen Northway in exchange for stock issued at par. The building is mortgaged for $186,100 for 20 years at 6%, and there is accrued interest of $5,100 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $63,500 and the building at $220,000 and that Gretchen Northway’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.

Journalize the entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Alpha Sounds Corp.

General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
191	Building
192	Accumulated Depreciation-Building

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

Answer 1

	Journal Entry	Dr. ($)	Cr. ($)
Part 1	cash	119000
	To common stock		119000
	(to record issue of shares)
	(119000 shares * $1=$119000)
Part 2 a	promotional services	3500
	To common stock		3500
	(to record issue of shares for promotional)
	(3500 shares * $1 = $3500)
Part 2 b	cash	48600
	To common stock		48600
	(to record issue of shares to Michele Kirby)
	(48600 shares * $1 = $48600)
Part 3	Land	63500
	Building	220000
	To mortgage note		186100
	To accrued interest		5100
	To common stock		92300