Question

On February 3, Teel Corporation enters into a subscription contract with several subscribers for 7,000 shares of $10 par common stock at a price of $15 per share. The contract requires a down payment of 25%, with the remaining balance to be paid on May 3. The stock will be issued to each subscriber upon full payment.

Required:

	Prepare journal entries to record the following:
1.	The February 3 receipt of the down payment and signing of the contract.
2.	The May 3 receipt of the full remaining balance from subscribers. The market price is currently $16 per share.

CHART OF ACCOUNTS

Teel Corporation

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
198	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
312	Common Stock Subscribed
320	Additional Paid-in Capital on Common Stock
326	Subscriptions Receivable
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare journal entries to record the February 3 receipt of the down payment and signing of the contract. Additional Instruction

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4

Prepare journal entries to record the May 3 receipt of the full remaining balance from subscribers. The market price is currently $16 per share.

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4

Answer 1

Solution:
1.)

Date	Particulars	Post. Ref	Debit ($)	Credit ($)
Feb 3	Cash (7000*15*25%)		$26,250
	Subscription receivable-common stock (7000*15*75%)		$78,750
	Common stock subscribed (7000*10)			$70,000
	Additional paid in capital-common stock			$35,000

2.)

Date	Particulars	Post Ref	Debit ($)	Credit ($)
May 3	Cash (7000*15*75%)		$78,750
	Subscription receivable-common stock			$78,750
May 3	Common stock subscribed(7000*10)		$70,000
	Common stock, $par			$70,000