Question

Jan. 1		The company was granted a charter that authorizes the issuance of an unlimited number of common shares, and 268,000 preferred shares that entitle the holder to a $4 per share annual dividend.
Jan. 10		Issued 15,400 common shares to the founders of the corporation for land that has a fair value of $462,000.
Mar. 10		Issued 4,400 preferred shares for cash for $100 per share.
Apr. 15		Issued 110 common shares to a car dealer in exchange for a used vehicle. The asking price for the car is $6,300. At the time of the exchange, the common shares are selling at $58 per share.
Aug. 20		Decided to issue shares on a subscription basis to select individuals, giving each person the right to purchase 230 common shares at $60 per share. Forty individuals accepted the company’s offer and agreed to pay 10% down and the remainder in three equal monthly instalments starting in February 2021.
Oct. 11		Issued 3,000 common shares and 600 preferred shares for a lump sum of $227,300 cash. At the time of sale, both the common and preferred shares were actively traded. The common shares were trading at $58 each; the preferred shares at $105 each.
Dec. 31		Declared cash dividends totalling $26,000, payable on January 31, 2021, to holders of record on January 15, 2021.

(a)

Prepare the general journal entries to record the transactions.

Answer 1

Answer - Journal Entries
Date	Particulars	Debit	Credit
Jan-01	No Journal Entry required
Jan-10	Land Account	462000
	To Equity Share Capital		462000
Mar-10	Cash	440000
	To Preference Share Capital		440000
Apr-15	Used Vehicle	6300
	To Equity Share Capital		6300
Aug-20	Cash	55200
	Share Applicants	496800
	To Equity Share Capital		552000
Oct-11	Cash	227300
	Discount on issue of Shares	12700
	To Equity Share Capital		180000
	To Preference Share Capital		60000
Dec-31	Retained Earnings	26000
	To Dividend Payable		26000
Note 1	With the information avaiable in the question , we have assumed that
	Preference Share is having a face value of $ 100 while Equity Share
	has a face value of $ 60.
Note 2	Market price of the Preference Share or the Equity Share are not to be
	considered for issue of shares
Note 3	The difference of $ 240000 and $ 227300 cash received, has been assumed
	to be the Discount on issue of shares
Note 4	40 Individuals accepted the offer of 230 shares @ $ 60 each = $ 552000
	out of which 10% money was received i.e. $ 55200