On April 1, 10,000 shares of $5 par common stock were issued at $22, and on April 7, 5,000 shares of $50 par preferred stock were issued at $104. On April 20, 5,000 shares of common stock were issued in exchange for land. The stock had a market value of $23 on that date. Journalize the entries for April 1, April 7, and April 20.
To journalize the entries for April 1, April 7, and April 20, we need to understand the basic principles of accounting and how to record transactions. Here's a step-by-step explanation:
1. Determine the account titles: In this case, we have common stock, preferred stock, and land accounts.
2. Determine the amounts: On April 1, 10,000 shares of common stock were issued at $22 per share, resulting in a total value of $220,000 ($22 x 10,000). On April 7, 5,000 shares of preferred stock were issued at $104 per share, totaling $520,000 ($104 x 5,000). On April 20, 5,000 shares of common stock were issued in exchange for land, with a market value of $23 per share, resulting in a total value of $115,000 ($23 x 5,000).
3. Determine the debits and credits: When issuing stock, we debit the respective stock account and credit the equity or cash account.
Now let's journalize each transaction:
April 1:
- Debit: Common Stock ($220,000)
- Credit: Cash ($220,000)
April 7:
- Debit: Preferred Stock ($520,000)
- Credit: Cash ($520,000)
April 20:
- Debit: Land ($115,000)
- Credit: Common Stock ($115,000)
These journal entries reflect the issuance of the stock and the exchange of stock for land. Remember, the amounts used in this example are based on the given information, so make sure to adjust them if different values are provided.