Question

Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred:

a. Collected $34 cash per share from four individuals and issued 4,400 shares of common stock to each.

b. Issued 5,400 shares of common stock to an outside investor at $34 cash per share.

c. Issued 7,400 shares of preferred stock at $19 cash per share.

Required:

Prepare the journal entries indicated for each of these transactions.

Prepare the stockholders’ equity section of the balance sheet at December 31. At the end of the year, the accounts reflected net income of $30,000. No dividends were declared.

Answer 1

Account Titles	Debit	Credit
Cash (4400*34)	$149,600
Common stock		$44,000
Additional paid in capital common stock		$105,600
Cash (5400*34)	$183,600
Common stock		$54,000
Additional paid in capital common stock		$129,600
Cash (7400*19)	$140,600
Preferred stock		$74,000
Additional paid in capital preferred stock		$66,600

Balance Sheet
Stockholders equity:	Amount	Amount
Contributed capital:
Common stock (44000+54000)	$98,000
Additional paid in capital common stock (105,600 +129600)	253,200
Preferred stock	74,000
Additional paid in capital preferred stock	66,600
Contributed capital
Retained Earnings:
Net income	30,000
Total Stockholders equity		$503,800