Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred: a. Collected $39 cash per share from four individuals and issued 4,900 shares of common stock to each. b. Issued 5,900 shares of common stock to an outside investor at $39 cash per share. c. Issued 7,900 shares of preferred stock at $21 cash per share.

Question

Karson Greer

Business

22 October, 12:38

Ava School of Learning obtained a charter at the start of the year that authorized 50,000 shares of no-par common stock and 20,000 shares of preferred stock, par value $10. During the year, the following selected transactions occurred: a. Collected $39 cash per share from four individuals and issued 4,900 shares of common stock to each. b. Issued 5,900 shares of common stock to an outside investor at $39 cash per share. c. Issued 7,900 shares of preferred stock at $21 cash per share.

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Jaden Olsen · Answer 1

The requirement of question is to prepare journal entries for each transaction and prepare stockholder's equity section of balance sheet; The net income for the year is $35,000. No dividends were declared or paid during the year.

Explanation:

a. Cash 4,900*4*39 Dr.$764,400

Common Stocks Cr.$764,400

b. Cash 5,900*39 Dr.$230,100

Common Stocks Cr.$230,100

c. Cash 7,900*21 Dr.$165,900

Preferred stocks 7,900*10 Cr.$79,000

Paid in capital in excess of par 7,900 * (21-10) Cr.$86,900

Extracts from Balance Sheet

Common Stocks (764,400+230,100) $994,500

Preferred Stocks $79,000

Paid in Capital in excess of par $86,900

Retained Earnings $35,000

Total $1,195,400