Corporations: Organization and Capital Stock Transactions

DeLong Corporation was organized on January 1, 2020. It is authorized to issue 10,000 shares of 8%, $100 per value preferred stock, and 500,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.

Instruction

1. Journalize the transactions
2. Post to the stockholders'equity accounts.
3. Prepare the paid-in capital section of stockholders'equity at December 31, 2020.

Solution

Fechter Corporation had the following stockholders equity accounts on January 1, 2019: Common Stock ($5 par) $50,000, Paid-in Capital in Excess of Par-Common Stock $200,000, and Retained Earnings $100,000. In 2020, the company had the following treasury stock transactions

Fechter Corporation uses the cost method of accounting for treasury stock. In 2020,the company reported net income of $30,000

Instruction

1. Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2020, for net income.
2. Open accounts for (1) Paid-in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earnings. Post toe these accounts using J10 as the posting reference..
3. Prepare the stockholders' equity section for Fechter Corporation at December 31, 2020.

Solution

The stockholders equity accounts of Castle Corporation on January 1, 2020, were as follows

During 2020, the corporation had the following transactions and events pertaining to its stockholder' equity.

No dividends were declared during the year.

Instruction

1. Journalize the transactions and the closing entry for net income
2. Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use J5 for the posting reference.)
3. Prepare the stockholders' equity section at December 31, 2020.

Solution

Peck Corporation is authorized to issue 20,000 shares of $50 par value, 10% preferred-stock and 125,000 shares of $5 par value common stock. On January 1, 2019, the ledger contained the following stockholders equity balances

Instruction

1. Journalize the transactions and the closing entry for net income
2. Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use J2 for the posting reference.)
3. Prepare the stockholders' equity section at December 31, 2020.

Solution

The following stockholders equity accounts arranged alphabetically are in the ledger of Galindo Corporation at December 31, 2020.

Instruction

Prepare the stockholders' equity section at December 31, 2020.

Solution

Irwin Corporation has been authorized to isue 20,000 shares of $100 par value, 10% preferred stock and 1,000,000 shares of no-par common stock. The corporation assigned a $2,50 stated value to the common stock. At December 31, 2020, the ledger contained the following balances pertaining to stockholders equity.

Instruction

1. prepare the journal entries for the
   
   1. Issuance of preferred stock for land.
   2. Issuance of common stock for cash
   3. Purchase of common treasury stock for cash.
   4. Sale of treasury stock for cash
2. Prepare the stockholders' equity section at December 31, 2020.

Solution

Andrea has prepared the following list of statements about corporations

1. A corporation is an entity separate and district from its owners.
2. As a legal entity, a corporation has most of the rights and privileges of a person.
3. Most of the largest U.S. corporation are privately held corporations.
4. Companies may buy, own, and sell property; borrow money; enter into legally binding contracts; and sue and be sued.
5. The net income of a corporation is not taxed as a separate entity.
6. Creditors have a legal claim on the personal assets of the owners of a corporation if the corporation does not pay its debts.
7. The transfer of stock from one owner to another requires the approval of either the corporation or other stockholders.
8. The board of directors of a corporation legally owns the corporation.
9. The chief accounting officer of a corporation is the controller.
10. Corporations are subject to fewer state and federal regulations than partnerships or proprietorships

Instructions

Identify each statement as true or false. if false, indicates how to correct the statement

Solution

During its first year of operations, Foyle Corporation had the following transactions pertaining to its common stock.

Instruction

1. Journalize the transactions, assuming that the common stock has a par value of $5 per share.
2. Journalize the transactions, assuming that the common stock is no-par with a stated value of $1 per share.

Solution

Osage Corporation issued 2,000 shares of stock.

Instruction

1. The stock had a par value of $5 per share and was issued for a total of $52,000.
2. the stock had a stated value of $5 per share and was issued for a total of $52,000.
3. The stock had no par or stated value and was issued for a total of $52,000.
4. the stock had a par value of $5 per share and was issued to attorneys for services during incorporation valued at $52,000.
5. The stock had a par value of 45 per share and was issued for land worth $52,000.

Solution

Quay Co. had the following transactions during the current period.

Instruction

Journalize the transactions

Solution