Question

chp 12-08
instructions

Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 26,000 shares of preferred 2% stock, $100 par and 550,000 shares of $10 par common stock. The following selected transactions were completed during the first year of operations:

Feb.	5	Issued 247,000 shares of common stock at par for cash.
	5	Issued 300 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr.	9	Issued 69,100 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $153,500, $488,060 and $160,000 respectively.
June	14	Issued 15,000 shares of preferred stock at $109 for cash.

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

CHART OF ACCOUNTS

Professional Products Inc.

General Ledger

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

	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

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

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12

Effect of Stock Split

Willey’s Grill & Restaurant Corporation wholesales ovens and ranges to restaurants throughout the Southwest. Willey’s Grill & Restaurant, which had 72,000 shares of common stock outstanding, declared a 4-for-1 stock split.

a. What will be the number of shares outstanding after the split?
_____________shares

b. If the common stock had a market price of $156 per share before the stock split, what would be an approximate market price per share after the split?
$_______ per share

Answer 1

1)

Date	Account	Debit	credit
Feb 5	cash	2470000
	common stock [247000*10]		2470000
Feb 5	Organisation expense/legal expense	3000
	cash [300*10]		3000
Apr 9	Land	153500
	Building	488060
	Equipment	160000
	common stock [69100*10]		691000
	Paid-In Capital in Excess of Par-Common Stock		110560
June 14	cash [15000*109]	1635000
	Paid-In Capital in Excess of Par-Preferred Stock		135000
	Preferred Stock [15000*100]		1500000

2)

number of shares outstanding after the split = 72000*4=288000 shares

market price per share after the split = 156*1/4 = $ 39 per share