2. Presented below is information related to Watson Company: (a) The company is

Question

2. Presented below is information related to Watson Company: (a) The company is granted a charter that authorizes issuance of 15,000 shares of $100 par value preferred stock and 40,000 shares of no-par common stodk (b)12.000 shares of common stock are issued to the founders of the corporation for land valued by the board of directors at $400,000. The board establishes a stated value of $10 a share for the common stock (c) 6,000 shares of preferred stock are sold for cash at $110 per share (d) The company issues 200 shares of common stock to its attorneys for costs associated with starting the company. At that time, the common stock was selling at $60 per share. Required: Prepare the general journal entries necessary to record the above transactions.

Explanation / Answer

SOLUTION

S.No. Account titles and Explanation Debit ($) Credit ($) 1. No entry necessary 2. Land 400,000 Common Stock (12,000 * $10) 120,000 Paid-in Capital in Excess of Stated Value 280,000 3. Cash 660,000 Preferred Stock 600,000 Paid-in Capital in Excess of Par - Preferred Stock 60,000 4. Organization Expense 12,000 Common Stock (200 * 10) 2,000 Paid-in Capital in Excess of Stated Value 10,000

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