Preferred 1% Stock, $120 par (300,000 shares authorized,
36,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,320,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . 180,000
Common Stock, $15 par (2,000,000 shares authorized,
1,400,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000,000
Paid-In Capital in Excess of Par—Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,000,000
At the annual stockholders’ meeting on August 5, the board of directors presented a
plan for modernizing and expanding plant operations at a cost of approximately $9,000,000. The plan provided (a) that the corporation borrow $1,500,000, (b) that 20,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that a building, valued at $4,150,000, and the land on which it is located, valued at $800,000, be acquired in accordance with preliminary negotiations by the issuance of 300,000 shares of common stock. The plan was approved by the stockholders and accomplished by the following transactions:
Oct.
9. Borrowed $1,500,000 from St. Peter City Bank, giving a 4% mortgage note.
17. Issued 20,000 shares of preferred stock, receiving $126 per share in cash.
28. Issued 300,000 shares of common stock in exchange for land and a building,
according to the plan.
Instructions
Journalize the entries to record the October transactions.
Answers:
Oct. 9 Cash 1,500,000
Mortgage Note Payable 1,500,000
17 Cash (20,000 shares × $126) 2,520,000
Preferred Stock (20,000 shares × $120) 2,400,000
Paid-In Capital in Excess of Par—
Preferred Stock [20,000 shares × ($126 – $120)] 120,000
28 Building 4,150,000
Land 800,000
Common Stock (300,000 shares × $15) 4,500,000
Paid-In Capital in Excess of Par—
Preferred Stock [300,000 shares × ($16.50 – $15.00)] 450,000