Question

Stock Transactions for Corporate Expansion On December 1 of the current year, the following accounts and their balances appear in the ledger of Latte Corp., a coffee processor: Preferred 2% Stock, $75 par (500,000 shares authorized, 150,000 shares issued) $11,250,000 Paid-In Capital in Excess of Par-Preferred Stock 1,800,000 Common Stock, $100 par (700,000 shares authorized, 250,000 shares issued) 25,000,000 Paid-In Capital in Excess of Par-Common Stock 2,000,000 50,000,000 Retained Earnings At the annual stockholders' meeting on March 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $25,400,000. The plan provided (a) that a building, valued at $3,700,000, and the land on which it is located, valued at $5,400,000, be acquired in accordance with preliminary negotiations by the issuance of 85,000 shares of common stock, (b) that 70,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that the corporation borrow $10,700,000. The plan was approved by the stockholders and accomplished by the following transactions: May 11. Issued 85,000 shares of common stock in exchange for land and a building, according to the plan. May 20. Issued 70,000 shares of preferred stock, receiving $80 per share in cash. May 31. Borrowed $10,700,000 from Laurel National, giving a 6% mortgage note. Required: Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

Answer 1

Journal entries
date	Particulars			Debit	Credit
11-May	building			3700000
	land			5400000
	common stock (85000*100)				8500000
	paid in capital in excess of par -common stock				600000
20-May	cash (70000*80)			5600000
	preferred stock (70000*75)				5250000
	paid in capital in exess of par-preferred stock				350000
31-May	cash			10700000
	mortgage payable				10700000