E 13-1
The first step in organizing a corporation is to obtain a charter from the state. The charter authorizes the corporation to issue a certain number of shares of stock to the owners of the business, who are called stockholders. The incorporators (Kelly and Lewis) will need a set of bylaws to determine how the corporation is to be governed internally. The stockholders will elect a board of directors who in turn appoint officers to manage the corporation on a day-to-day basis.
Note: Student responses may vary.
(10-15 min.)
E 13-2Req. 1
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Journal |
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DATE |
ACCOUNTS AND EXPLANATIONS |
POST. REF. |
DEBIT |
CREDIT |
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April |
19 |
Cash (1,000 ´ $10.50) |
10,500 |
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Common Stock (1,000 ´ $1.50) |
1,500 |
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Paid-in Capital in Excess of |
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Par—Common |
9,000 |
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May |
3 |
Cash |
12,000 |
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Class A Preferred Stock |
12,000 |
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11 |
Inventory |
23,000 |
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Equipment |
11,000 |
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Common Stock (3,300 ´ $1.50) |
4,950 |
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Paid-in Capital in Excess of |
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Par—Common |
29,050 |
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15 |
Cash (1,000 ´ $62) |
62,000 |
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Class B Preferred Stock |
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(1,000 ´ $50) |
50,000 |
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Paid-in Capital in Excess of |
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Stated Value—Class B Preferred |
12,000 |
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Req. 2
Total paid-in capital = $118,500
($1,500 + $9,000 + $12,000 + $4,950 + $29,050 + $50,000 + $12,000 = $118,500)
(15-20 min.)
E 13-3Req. 1
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Journal |
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DATE |
ACCOUNTS AND EXPLANATIONS |
POST. REF. |
DEBIT |
CREDIT |
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Aug. |
6 |
Cash |
15,000 |
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Common Stock (500 ´ $1) |
500 |
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Paid-in Capital in Excess of |
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Par—Common |
14,500 |
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Issued common stock. |
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12 |
Cash |
18,000 |
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Preferred Stock |
18,000 |
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Issued preferred stock. |
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14 |
Land |
26,000 |
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Common Stock (1,000 ´ $1) |
1,000 |
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Paid-in Capital in Excess of |
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Par—Common |
25,000 |
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Issued common stock for land. |
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31 |
Income Summary |
13,000 |
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Retained Earnings |
13,000 |
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Closed net income to Retained |
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Earnings. |
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(continued)
E 13-3Req. 2
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Stockholders’ Equity |
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Paid-in capital: |
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Preferred stock, $3, no-par, 100,000 shares authorized, 300 |
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shares issued |
$18,000 |
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Common stock, $1 par, 500,000 shares authorized, 1,500 |
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shares issued |
1,500 |
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Paid-in capital in excess of par—common |
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($14,500 + $25,000) |
39,500 |
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Total paid-in capital |
59,000 |
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Retained earnings |
13,000 |
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Total stockholders’ equity |
$72,000 |
(10-15 min.)
E 13-4|
Journal |
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DATE |
ACCOUNTS AND EXPLANATIONS |
POST. REF. |
DEBIT |
CREDIT |
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AMOUNTS IN THOUSANDS |
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Cash (50,000 ´ $5) |
250 |
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Series A Preferred Stock |
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(50,000 ´ $2) |
100 |
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Capital in Excess of Par— |
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Series A Preferred |
150 |
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Cash (370,000 ´ $10) |
3,700 |
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Series B Preferred Stock |
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(370,000 ´ $2) |
740 |
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Capital in Excess of Par— |
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Series B Preferred |
2,960 |
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|
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Cash |
72,370 |
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Common Stock |
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(9,000,000 ´ $.10) |
900 |
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Capital in Excess of Par— |
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Common |
71,470 |
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Note: Balance of Capital in excess of par is $74,580
($150 + $2,960 + $71,470 = $74,580)
(5-10 min.)
E 13-5|
Journal |
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DATE |
ACCOUNTS AND EXPLANATIONS |
POST. REF. |
DEBIT |
CREDIT |
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(a) |
True no-par stock: |
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Cash (5,000 ´ $8) |
40,000 |
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Common Stock |
40,000 |
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Issued no-par common stock. |
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(b) |
No-par stock with $2 stated value: |
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Cash (5,000 ´ $8) |
40,000 |
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Common Stock (5,000 ´ $2) |
10,000 |
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Paid-in Capital in Excess of |
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Stated Value—Common |
30,000 |
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Issued no-par common stock |
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with $2 stated value. |
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(10-15 min.)
E 13-6|
Stockholders’ Equity |
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Paid-in capital: |
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Class A preferred stock, $4.50 no-par, 5,000 shares |
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authorized, 300 shares issued |
$ 20,000 |
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Class B preferred stock, 5%, no-par, with $50 stated |
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value, 1,000 shares authorized and issued |
50,000 |
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Paid-in capital in excess of stated value—Class B |
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preferred |
10,000 |
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Common stock, $1 par, 10,000 shares authorized, 5,300 |
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shares issued |
5,300 |
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Paid-in capital in excess of par—common |
60,700 * |
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Total paid-in capital |
146,000 |
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Retained earnings |
46,000 |
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Total stockholders’ equity |
$192,000 |
__________
*Computation
Nov. 23: 2,000 shares ´ ($12.50 ! $1.00) =............................ $23,000
Dec. 12: $25,000 + $16,000 ! (3,300 shares ´ $1) =.....…… 37,700
$60,700
(10 min.)
E 13-7|
Paid-in capital consists of: |
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Preferred equity |
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Issued for cash (2,000 shares ´ $80) |
$160,000 |
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Common equity |
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Issued for cash (26,000 shares ´ $11) |
286,000 |
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Issued for patent |
40,000 |
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Total paid-in capital |
$486,000 |