Problem Issuance Of Stock Organization Costs Snowbound Corpo

Problemissuanceofstockorganizationcostssnowboundcorporationwas

Problemissuanceofstockorganizationcostssnowboundcorporationwas

Snowbound Corporation was incorporated in July. The firm's charter authorized the sale of 200,000 shares of $10 par-value common stock. The following transactions occurred during the year: 7/1: Sold 45,000 shares of common stock to investors for $18 per share. Cash was collected and the shares were issued. 7/7: Issued 600 shares to Sharon Dale, attorney-at-law, for services rendered during the corporation's organizational phase. Dale charged $12,600 for her work. 8/11: Sold 20,000 shares to investors for $22 per share. Cash was collected and the shares were issued. 12/14: Issued 30,000 shares to the MJB Company for land valued at $900,000.

Prepare journal entries to record each transaction.

Paper For Above instruction

Journal Entries for Snowbound Corporation's Stock Issuance Transactions

1. Record the sale of 45,000 shares at $18 per share on July 1

Debit: Cash (45,000 shares x $18) = $810,000

Credit: Common Stock (45,000 shares x $10 par value) = $450,000

Credit: Additional Paid-in Capital = $360,000

This entry records the cash received from investors and the issuance of common stock at par value and the excess over par.

2. Record issuance of 600 shares to Sharon Dale for services

Debit: Organizational Expenses (or Professional Fees) = $12,600

Credit: Common Stock (600 shares x $10 par value) = $6,000

Credit: Additional Paid-in Capital = $6,600

This records the issuance of shares in exchange for services, valuing the services at the total fair value of the shares issued.

3. Record the sale of 20,000 shares at $22 per share on August 11

Debit: Cash (20,000 shares x $22) = $440,000

Credit: Common Stock (20,000 shares x $10 par value) = $200,000

Credit: Additional Paid-in Capital = $240,000

This entry recognizes the cash received and the issuance of stock at par and excess over par.

4. Record issuance of 30,000 shares to MJB Company for land valued at $900,000

Debit: Land = $900,000

Credit: Common Stock (30,000 shares x $10 par value) = $300,000

Credit: Additional Paid-in Capital = $600,000

This reflects issuance of stock in exchange for land at the land's appraised value.

Conclusion

The journal entries above properly record each stock issuance transaction for Snowbound Corporation, reflecting cash inflows, expenses, and non-cash asset exchange with appropriate classification of common stock at par value and additional paid-in capital.

References

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