To expand operations, Aragon Consulting issued 1,300 shares of previously unissu

Question

To expand operations, Aragon Consulting issued 1,300 shares of previously unissued common stock with a par value of $1. The price for the stock was $50 per share.

1-a. Complete the table below, indicating the account, amount, and direction of the effect for the stock issuance. (Enter any decreases to account balances with a minus sign.)

1-b. Prepare the journal entry for the stock issuance. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

2-a. Complete the table below, indicating the account, amount, and direction of the effect for the stock issuance with a par value of $2. (Enter any decreases to account balances with a minus sign.)

2-b. Prepare the journal entry for the stock issuance, if the par value were $2 per share. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

1a: The accounts affected are : Cash – Increase of $65000 (1300*50)

Share capital- Increase of $1300 (1300*1)

Additional paid in capital – Increase of (1300*49)= $63700

B: Journal entry

Cash- Dr 65000

Share capital – Cr                            1300

Additional Paid in capital-Cr       63700  

2a: The accounts affected are : Cash – Increase of $65000 (1300*50)

Share capital- Increase of $2600 (1300*2)

Additional paid in capital – Increase of (1300*48)= $62400

B: Journal entry

Cash- Dr 65000

Share capital – Cr 2600

Additional Paid in capital-Cr       62400  

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