Question

Cash and non-cash share issuances: Chavoy Corporation was organized on July 1. The company’s charter authorizes 100,000 shares of $10 par value common stock. On August 1, the attorney who helped organize the corporation accepted 800 shares of Chavoy common stock in settlement for the services provided (the services were valued at $9600). On August 15, Chavoy issued 5000 common shares for $75,000 cash. On October 15, Chavoy issued 3000 common shares to acquire a vacant land site appraised at $48,000. Prepare the journal entries to record the stock issuances on August 1, August 15, and October 15.

Answer 1

Answer:

The Journal entries are as follows:

(i) On August 1,

Legal expense A/c   Dr. $9,600

To Common stock                       $8,000

To Additional Paid-in capital       $1,600

(To record issue of 800 common shares of par value $10 to attorney)

(ii) On August 15,

Cash A/c                  Dr. $75,000

To Common stock                       $50,000

To Additional Paid-in capital       $25,000

(To record issue of 5,000 common shares each at $10 par value)

(iii) On October 15,

Land A/c                  Dr. $48,000

To Common stock                       $30,000

To Additional Paid-in capital       $18,000

(To record issue of 3,000 common shares as a consideration for purchase of Land)