Question

Exercise 18-9 (Algo) New equity issues; offerings announcements [LO18-4]

When companies offer new equity security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the equity offerings reported in December 2021:

New Securities Issues

Equity

American Materials Transfer Corporation (AMTC)—6.5 million common shares, $0.001 par, priced at $13.520 each through underwriters led by Second Tennessee Bank N.A. and Morgan, Dunavant & Co.,
according to a syndicate official.

Proactive Solutions Inc. (PSI)—Offering of 9 million common shares, $0.01 par, was priced at $14.00 a
share via lead manager Stanley Brothers, Inc., according to a syndicate official.

Required:
Prepare the appropriate journal entries to record the sale of both issues to underwriters. Ignore share issue costs. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)

• 1

  Record the issuance of the AMTC stock.

• 2

  Record the issuance of the PSI stock.

Answer 1

Journal entry to record sale of both issues to underwriters is given below
Date	General Journal	Debit	Credit
1	Cash (6.5 million*$13.520)	$87,880,000
	Common stock (6.5 million*$0.001)		$6,500
	Paid in capital in excess of par (6.5 million*13.519)		$87,873,500
	(To record issue of AMTC stock)
2	Cash (9 million*$14)	$126,000,000
	Common stock (9 million*$0.01)		$90,000
	Paid in capital in excess of par (9 million*13.99)		$125,910,000
	(To record issue of PSI stock)
Cash is received from share issue is debited for increase in cash as there is cash inflow
Common stock equal to its par value is credited for increase in capital of company
Amount received in excess of par value is credited to paid in capital in excess of par