Question

Part A
During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue $100,000,010 common shares, $1 par per share.

Required:
Prepare the appropriate journal entries to record each transaction.

Jan.		9		Issued $40,000,000 common shares for $10 per share.
Mar.		11		Issued 4,000 shares in exchange for custom-made equipment. McCollum’s shares have traded recently on the stock exchange at $10 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	3,000,000
	Paid-in capital—donation of land		3,000,000
Sept. 1	Common stock	4,000,000
	Retained earnings	56,000,000
	Cash		60,000,000
Dec. 1	Cash	32,000,000
	Common stock		2,000,000
	Gain on sale of previously issued shares		30,000,000

Required:
Prepare the journal entries that should have been recorded for each of the transactions.

Answer 1

Part A	Answer:-
	Journal Entries :-
	The journal entries are prepared as follow
	Date	particular	Ref.	DEBIT	CREDIT
	Jan-09	CASH( $40,000,000 SHARES @ $10 PER SHARE)		$ 400,000,000.00
		COMMON STOCK($4000 @10PER SHARE)			$    40,000,000.00
		PAID IN CAPITAL IN EXCESS OF PAR			$ 360,000,000.00
	Explaination
	Cash is an assets and its balance increses , so it is debitd Common stock is equity and its balance increases so , it is creditd paid in capital in excess of par is a liability and its balance increses , so it is credited
	Date	particular	Ref.	DEBIT	CREDIT
	Mar-11	Equipment(4000 share @10 per share)		$             40,000.00
		COMMON STOCK($4000 @1PER SHARE)			$               4,000.00
		PAID IN CAPITAL IN EXCESS OF PAR			$             36,000.00
	Explaination
	Equipment is an assets and its balance increses , so it is debitd . Common stock is equity and its balance increses , so it is creditd . Paid in capital in excess of par is a liability and its balance increses , so it is credited.
Part B	Answer:-
	Date	particular	Ref.	DEBIT	CREDIT
	Jan-12	LAND		3,000,000
		Paid-in capital—donation of land			3,000,000
	Explaination
		land is an assets its balance increses , so it is debited . Revenue-donation of land is income and its balance increses, so it is credited
	Date	particular	Ref.	DEBIT	CREDIT
		Common stock		400,000
		Paid-in-capital in excess of par		3,600,000
	Sep-01	Retained earnings		2,000,000
		Cash			6,000,000
	Explaination
		Cash is an assets and its balance decreses , so it is creditd . Common stock is equity and its balance decreses, so it is debited . Paid in capital in excess of par is a liability and its balance decreses , so it is debited.Retained earnings is a liability and its balance decreses, so it is debitd
	Date	particular	Ref.	DEBIT	CREDIT
	Dec-01	Cash		32,000,000
		Common stock			2,000,000
		Gain on sale of previously issued shares			30,000,000.00
	Explaination
		Cash is an assets and its balance increses, so it is debitd . Common stock is equity and its balance is increses , so it is credited