Question

Instructions

On February 12, Quality Carpet Inc., a carpet wholesaler, issued for cash 1,000,000 shares of no-par common stock (with a stated value of $0.25) at $1.20, and on August 3, it issued for cash 10,000 shares of preferred stock, $15 par at $21.

Required:

A.	Journalize the entries for February 12 and August 3, assuming that the common stock is to be credited with the stated value. Refer to the Chart of Accounts for exact wording of account titles.
B.	What is the total amount invested (total paid-in capital) by all stockholders as of August 3?

Answer 1

	Journal Entries
A	Date	Particulars	Debit	Credit
	12-Feb	Cash/Bank acc (1,000,000 share *$1.20)	$1,200,000
		To common stock (1,000,000 share *$0.25)		$250,000
		To paid in capital in excess of par (1,000,000 share *(1.2 -0.25)		$950,000
		(Common stock issued recorded)
	3-Aug	Cash/Bank acc (10,000 share *$21)	$210,000
		To Preference stock (10,000 share *$15)		$150,000
		To paid in capital in excess of par (10,000 share *($21-$15))		$60,000
		(Preference stock issued recorded)
	B	Total Paid in capital As on August 3
		Common stock	$250,000
		Preference stock	$150,000
		Additional paid in capital for common stock	$950,000
		Additional paid in Preference for common stock	$60,000
		Total paid in capital	$1,410,000