Financial and Managerial Accounting (Looseleaf) (Custom Package)
Financial and Managerial Accounting (Looseleaf) (Custom Package)
6th Edition
ISBN: 9781259754883
Author: Wild
Publisher: MCG
Question
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Chapter 11, Problem 3E
To determine

Journal Entries:

It is a book of original entry. It records and summarizes financial transaction of an entity in chronological manner, generally according to dual aspect of accounting.

Accounting rules regarding journal entries:

  • Balance increase when: Assets, losses and expenses get debited and liabilities, gains, and revenue get credited.
  • Balance decrease when: Assets, losses and expenses get credited and liabilities, gains, and revenue get debited.

Stated Value:

It is the value of a share assign by the management of the company when its charter is silent about the face value of the share. It is assigned for accounting purpose.

To prepare: Journal entry.

Expert Solution & Answer
Check Mark

Explanation of Solution

1.

4,000 shares issued for $35,000n with $5 par value:

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Cash 35,000
Common Stock 20,000
Paid in capital in excess of par value, common stock 15,000
(Being shares issued at above face value )
  • Cash is an asset. Since, cash is received, it increases asset. Hence debit Cash account
  • Common stock is equity. Since, shares is issued, it increases equity. Hence, credit Common Stock account.
  • Paid in capital in excess of par value, common stock is part of a shareholder’s fund. Since, money is received, it increases equity. Hence, credit Paid in capital in excess of par value, common stock.

Working Notes:

Calculation for common stock:

    CommonStock=NumberofShares×Facevalue =4,000×$5 =$20,000

Calculation For paid in excess of par value:

    Paidinexcessofparvalue=TotalCashCommonStock =$35,000$20,000 =$15,000

2.

2,000 shares for employees effort has been issued worth $40,000 for $1 stated value:

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Retained Earnings 40,000
Common Stock 2,000
Paid in capital in excess of par value, common stock 38,000
(Being shares issued at above face value )
  • Retained earnings are a part of stockholder’s equity. Since, shares is issued from it, it reduces retained earnings. Hence, debit Retained Earnings account.
  • Common stock is equity. Since, shares is issued, it increases equity. Hence, credit Common Stock account.
  • Paid in capital in excess of par value, common stock is part of a shareholder’s fund. Since, money is received, it increases equity. Hence, credit Paid in capital in excess of par value, common stock.

Working Notes:

Calculation for common stock:

    CommonStock=NumberofShares×Facevalue =2,000×$1 =$2,000

Calculation For paid in excess of par value:

    Paidinexcessofparvalue=TotalRetainedEarningsCommonStock =$40,000$2,000 =$38,000

3.

2,000 shares for employees effort has been issued worth $40,000:

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Retained Earnings 40,000
Common Stock 40,000
(Being shares issued at above face value )
  • Retained earnings are a part of stockholder’s equity. Since, shares is issued from it, it reduces retained earnings. Hence, debit retained earnings account.
  • Common stock is equity. Since, shares is issued, it increases equity. Hence, credit common stock account.

4.

1,000 shares issued for $60,000n with $50 par value:

Date Account Title and Explanation Post ref Debit ($) Credit ($)
Cash 60,000
Preferred Stock 50,000
Paid in capital in excess of par value, Preferred stock 10,000
(Being shares issued at above face value )
  • Cash is an asset. Since, cash is received, it increases asset. Hence debit Cash account
  • Preferred Stock is equity. Since, shares is issued, it increases equity. Hence, credit preferred stock account.
  • Paid in capital in excess of par value, preferred stock is part of a shareholder’s fund. Since, money is received, it increases equity. Hence, credit paid in capital in excess of par value, preferred stock.

Working Notes:

Calculation for common stock:

    PreferredStock=NumberofShares×Facevalue =1,000×$50 =$50,000

Calculation For paid in excess of par value:

    Paidinexcessofparvalue=TotalCashCommonStock =$60,000$50,000 =$10,000

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Chapter 11 Solutions

Financial and Managerial Accounting (Looseleaf) (Custom Package)

Ch. 11 - List the general rights of common stockholders.Ch. 11 - Prob. 7DQCh. 11 - Prob. 8DQCh. 11 - Prob. 9DQCh. 11 - Prob. 10DQCh. 11 - Prob. 11DQCh. 11 - Prob. 12DQCh. 11 - Prob. 13DQCh. 11 - Prob. 14DQCh. 11 - Prob. 15DQCh. 11 - Prob. 16DQCh. 11 - Prob. 17DQCh. 11 - Prob. 18DQCh. 11 - Prob. 19DQCh. 11 - Prob. 20DQCh. 11 - Prob. 21DQCh. 11 - Prob. 22DQCh. 11 - Prob. 1QSCh. 11 - Prob. 2QSCh. 11 - Prob. 3QSCh. 11 - Prob. 4QSCh. 11 - Prob. 5QSCh. 11 - Prob. 6QSCh. 11 - Prob. 7QSCh. 11 - Prob. 8QSCh. 11 - Prob. 9QSCh. 11 - Prob. 10QSCh. 11 - Prob. 11QSCh. 11 - Prob. 12QSCh. 11 - Prob. 13QSCh. 11 - Prob. 14QSCh. 11 - QS 11-15 Basic earnings per share A1 Epic company...Ch. 11 - Prob. 16QSCh. 11 - Prob. 17QSCh. 11 - Prob. 18QSCh. 11 - Prob. 19QSCh. 11 - Prob. 1ECh. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Prob. 4ECh. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Exercise 11–7 Identifying characteristics of...Ch. 11 - Prob. 8ECh. 11 - Prob. 9ECh. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 1PSACh. 11 - Prob. 2PSACh. 11 - Prob. 3PSACh. 11 - Prob. 4PSACh. 11 - Prob. 5PSACh. 11 - Prob. 1PSBCh. 11 - Prob. 2PSBCh. 11 - Prob. 3PSBCh. 11 - Prob. 4PSBCh. 11 - Prob. 5PSBCh. 11 - Prob. 11SPCh. 11 - Prob. 1GLPCh. 11 - Prob. 2GLPCh. 11 - Prob. 1BTNCh. 11 - Prob. 2BTNCh. 11 - Prob. 3BTNCh. 11 - Prob. 4BTNCh. 11 - Prob. 5BTNCh. 11 - Prob. 6BTNCh. 11 - Prob. 7BTNCh. 11 - Prob. 8BTNCh. 11 - Prob. 9BTN
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