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Professional Products Inc., a wholesaler of office products, was organized on February 5 of the current year, with an authorization of 100,000 shares of preferred 2% stock, $50 par and 650,000 shares of $25 par common stock. The following selected transactions were completed during the first year of operations:
Feb. 5. Issued 700,000 shares of common stock at par for cash.
Feb. 5. Issued 1,200 shares of common stock at par to an attorney in payment of legal fees for organizing the corporation.
Apr. 9. Issued 40,000 shares of common stock in exchange for land, buildings, and equipment with fair market prices of $120,000, $280,000, and $80.000, respectively.
June 14. Issued 25,000 shares of preferred stock at $82 for cash.
Journalize the transactions.

Sagot :

TutorAnneidn

Answer:Please find answers below

Explanation:

Being the issue of 700,000 shares of common stock at par for cash

Date             Accounts and explanation             Debit                Credit

5th Feb           Cash (700,000 shares × $25)    $17,500,000

      To Common Stock                                                                 $17,500,000  

 

Being the issue of 1200 shares of common stock at par for legal fees

Date             Accounts and explanation             Debit                Credit

5th Feb      Legal Fees  (1200 shares × $25)     $30,000

                To Common Stock                                                     $30,000

Being the issue of the common stock in exchange of assets

Date             Accounts and explanation             Debit                Credit

9th Apr        Land                                            $120,000

                 Building                                          $280,000

                Equipment                                        $80,000

     To Common Stock  (40,000 shares × $25)                       $1,000,000  

           To Paid in capital excess of par value

(error noticed as the debit and credit balance do not tall after computation the amount of land, building and equipment  $120,000, $280,000, and $80.000,with respect to the common stock of 40,000 shares × $25)

Being the issuance of the preferred stock.

Date             Accounts and explanation             Debit                Credit

14th Jun    Cash  (25,000 shares × $82)           $2,050,000

         To preferred Stock (25,000 shares × $50)                     $1,250,000

         To Paid in capital excess of par value                               $800,000

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