Question

Brief Exercise 10-40 (Algorithmic) Recording the sale of Common and Preferred Stock At the end of its first year of operations, Mulligan Corporation has outstanding shares of 122,000 common stock and 13,000 preferred stock. The State of Ohio authorized Mulligan to issue 14,000 shares of 6% preferred stock with a par value of $50 per share and 123,000 shares of common stock with a par value of per share. Any preferred stock sold during the year had a selling price of $60.00 per share. Mulligan's common stock was issued at $17. Required: Prepare the journal entry to record the issuance of stock during the year. Cash 2,657,000 x Preferred Stock 570,000 Additional Paid-In Capital-Preferred Stock 285,000 Common Stock 530,000 Additional Paid-In Capital-Common Stock 1.272.000 (Record sale of preferred and common stock)

Answer 1

General Journal	Debit	Credit
Cash	2,854,000
Preferred stock		650,000
Additional Paid- in capital-preferred stock		130,000
Common stock		610,000
Additional paid-in capital- common stock		1,464,000

Preferred stock to be credited with = Number of shares issued x Par value of 1 preferred share

= 13,000 x 50

= $650,000

Additional paid in capital preferred stock to be credited with = Number of shares issued x ( Issue price - Par value )

= 13,000 x (60-50)

= $130,000

Common stock to be credited with = Number of shares issued x Par value of 1 common share

= 122,000 x 5

= $610,000

Additional paid in capital common stock to be credited with = Number of shares issued x ( Issue price - Par value )

= 122,000 x ( 17-5)

= $1,464,000

Kindly comment if you need further assistance.

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