Question

Exercise 18-5 (Algo) Issuance of shares; noncash consideration (L018-4) During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholders' equity. The articles of incorporation authorized the issue of 6 million common shares, $1 par per share, and 2 million preferred shares, $50 par per share Feb. 12 Sold 3 million common shares, for $10 per share. 13 Issued 39,000 common shares to attorneys in exchange for legal services. 13 Sold 72,000 of its common shares and 6,000 preferred shares for a total of 51,035,800. Nov. 15 Issued 420,000 of its common shares in exchange for equipment for which the cash price was known to be $3,988,000. Required: Prepare the appropriate journal entries to record each transaction. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Enter your answers in whole dollars.) View transaction list Journal entry worksheet 4 > Issued 420,000 of its common shares in exchange for equipment for which the cash price was known to be $3,988,000.

Answer 1

Credit Si.No. 1 Debit $ 30,000,000 Date Account Titles and Explanation Feb.12 Cash Common Stock Paid in Capital - Excess of par, common $ 3,000,000 $ 27,000,000 2 $ 390,000 Feb.13 Legal expenses Common Stock Paid in Capital - Excess of par, Common $ 39,000 351,000 $ 3 $ 1,035,000 Feb.13 Cash Common Stock Paid in Capital - Excess of par, common Preferred Stock Paid in Capital - Excess of par, Preferred $ $ 72,000 648,000 300,000 15,000 $ $ 4 $ 3,988,000 Nov.15 Property, Plant and Equipment Common Stock Paid in Capital - Excess of par, common $ 420,000 $ 3,568,000

Working Notes: Feb.12 Cash = 3,000,000*$10 = $30,000,000 Common stock = 3,000,000*$1 = $3,000,000 Paid in Capital - Excess of par, common = 3,000,000*($10-$1)= $27,000,000 Feb.13 Legal Expenses = 39,000*$10 = $390,000 Common Stock = 39,000*$1 = $39,000 Paid in Capital - Excess of par, common = 39,000*($10-$1)= $351,000 Feb.13 Common stock = 72,000*$1 = $72,000 Paid in capital- Excess of par, common stock = 72,000*($10-$1) = $648,000 Preferred Stock = 6,000*$50 = $300,000 Paid in capital - excess of Par, Preferred = $1,035,000-$72,000-$648,000-$300,000 = $15,000 Nov.15 Common Stock = 420,000*$1 = $420,000 Paid in Capital - excess of par, common stock = $3,988,000-$420,000 = $3,568,000