Garcia Corporation recently hired a new accountant with extensive experience in

Question

Garcia Corporation recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation's capital stock. On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Explanation / Answer

Debit

Credit

$ 111,900

89,520

22,380

Note the following:
1. Since the company issued 7460 shares for $15 each, the cash received is $111,900.
2. Since the par value per share is $12 and 7460 shares have been issued, the Common Stock account is credited for $89520.
3. The "plug" number to make debits equal credits is $22380, the amount of the credit to Additional Paid-in Capital.

Debit

Credit

$ 808,500

279,300

529,200

The last entry should be treasury stock debit to cash instead of capital stock

Account

Debit

Credit

Cash (step 1)

$ 111,900

    Common Stock (step 2)

89,520

    Additional Paid-in Capital (step 3)

22,380

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