During its first year of operations, Collin Raye Corporation had the following transactions pertaining to its common stock.

Jan. 10 Issued 80,000 shares for cash at $6 per share.
Mar. 1 Issued 5,000 shares to attorneys in payment of a bill for $35,000 for services rendered in helping the company to incorporate.
July 1 Issued 30,000 shares for cash at $8 per share.
Sept. 1 Issued 60,000 shares for cash at $10 per share.

(a) Prepare the journal entries for these transactions, assuming that the common stock has a par value of $5 per share.

(b) Prepare the journal entries for these transactions, assuming that the common stock is no-par with a stated value of $3 per share

(a)

Jan 10

Debit: Cash $480,000

Credit: Common Stock $400,000

Credit: Paid in Capital $80,000

Mar 1

Debit: Accounts Payable $35,000

Credit: Common Stock $25,000

Credit: Paid in Capital $10,000

July 1

Debit: Cash $240,000

Credit: Common Stock $150,000

Credit: Paid in Capital $90,000

Sept 1

Debit: Cash $600,000

Credit: Common Stock $300,000

Credit: Paid in Capital $300,000

(b)

Jan 10

Debit: Cash $480,000

Credit: Common Stock $240,000

Credit: Additional Paid in Capital $240,000

Mar 1

Debit: Accounts Payable $35,000

Credit: Common Stock $15,000

Credit: Additional Paid in Capital $20,000

July 1

Debit: Cash $240,000

Credit: Common Stock $90,000

Credit: Additional Paid in Capital $150,000

Sept 10

Debit: Cash $600,000

Credit: Common Stock $180,000

Credit: Additional Paid in Capital $420,000

Explanation:

(a)

Jan 10

Debit: Cash (80,000 shares x $6 per share) $480,000

Credit: Common Stock (80,000 shares x $5 per share) $400,000

Credit: Paid in Capital (80,000 shares x $1 per share) $80,000

To Record Issuance of 80,000 shares at $6 per share par value.

Mar 1

Debit: Accounts Payable (5,000 shares x $7 per share) $35,000

Credit: Common Stock (5,000 shares x $5 per share) $25,000

Credit: Paid in Capital (5,000 shares x $2 per share) $10,000

To Record Issuance of 5,000 shares at $7 per share and excess paid in Capital in terms of Par Value to attorneys in payment of a bill.

July 1

Debit: Cash (30,000 shares x $8 per share) $240,000

Credit: Common Stock (30,000 shares x $5 per share) $150,000

Credit: Paid in Capital (30,000 shares x $3 per share) $90,000

To Record Issuance of 30,000 shares at $8 per share par value.

Sept 1

Debit: Cash (60,000 shares x $10 per share) $600,000

Credit: Common Stock (60,000 shares x $5 per share) $300,000

Credit: Paid in Capital (60,000 shares x $5 per share) $300,000

To Record Issuance of 60,000 shares at $10 per share par value.

(b)

Jan 10

Debit: Cash (80,000 shares x $6 per share) $480,000

Credit: Common Stock (80,000 shares x $3 per share) $240,000

Credit: Additional Paid in Capital (80,000 shares x $3 per share) $240,000

To Record Issuance of 80,000 shares of no-par common stock with $3 stated value for $6 per share.

In the above scenario, the legal capital of company would be $240,000, because no-par common stock has a stated value.

Mar 1

Debit: Accounts Payable (5,000 shares x $7 per share) $35,000

Credit: Common Stock (5,000 shares x $3 per share) $15,000

Credit: Additional Paid in Capital (5,000 shares x $4 per share) $20,000

To Record Issuance of 5,000 shares of no-par common stock with $3 stated value for $7 per share and excess paid in capital in terms of payment of a bill.

In the above scenario, the legal capital of company would be $15,000, because no-par common stock has a stated value.

July 1

Debit: Cash (30,000 shares x $8 per share) $240,000

Credit: Common Stock (30,000 shares x $3 per share) $90,000

Credit: Additional Paid in Capital (30,000 shares x $5 per share) $150,000

To Record Issuance of 30,000 shares of no-par common stock with $3 stated value for $8 per share.

In the above scenario, the legal capital of company would be $90,000, because no-par common stock has a stated value.

Sept 10

Debit: Cash (60,000 shares x $10 per share) $600,000

Credit: Common Stock (60,000 shares x $3 per share) $180,000

Credit: Additional Paid in Capital (60,000 shares x $7 per share) $420,000

To Record Issuance of 60,000 shares of no-par common stock with $3 stated value for $10 per share.

In the above scenario, the legal capital of company would be $180,000, because no-par common stock has a stated value.

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