Question

Stock transaction for corporate expansion

Pulsar Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Pulsar Optics on April 30 of the current year as follows:

Preferred 3% Stock, $50 par (400,000 shares authorized, 150,000 shares issued)$7,500,000

Paid-In Capital in Excess of Par—Preferred Stock1,200,000

Common Stock, $100 par (800,000 shares authorized, 250,000 shares issued)25,000,000

Paid-In Capital in Excess of Par—Common Stock2,000,000

Retained Earnings50,000,000

At the annual stockholders’ meeting on August 5, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $19,075,000. The plan provided (a) that the corporation borrow $7,100,000 (b) that $65,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that a building, valued at 3,400,000 and the land on which it is located, valued at 5,000,000 be acquired in accordance with preliminary negotiations by the issuance of 80,000. shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions:

Oct. 9.Borrowed $7,100,000 from St. Peter City Bank, giving a 4% mortgage note.

Oct. 17.Issued 65,000 shares of preferred stock, receiving $55 per share in cash.

Oct. 28.Issued 80,000 shares of common stock in exchange for land and a building, according to the plan.

Required:

Journalize the entries to record the October transactions.

If an amount box does not require an entry, leave it blank.

Oct. 9

Oct. 17

Oct. 28

Answer 1

Date	Accounts Title	Debit	Credit
Oct-09	Cash	$ 7,100,000
	Mortgage Note Payable		$ 7,100,000
Oct-17	Cash (65000 * $55)	$ 3,575,000
	Preferred Stock (65000 * $50)		$ 3,250,000
	Paid in Capital in Excess of Par-Preferred Stock		$     325,000
Oct-28	Building	$ 3,400,000
	Land	$ 5,000,000
	Common Stock (80000 * $100)		$ 8,000,000
	Paid in Capital in Excess of Par-Preferred Stock		$     400,000