Question

Bramble Corporation was organized on January 1, 2020. It is authorized to issue 10,500 shares of 8%, $100 par value preferred stock, and 477,000 shares of no-par common stock with a stated value of $2 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 75,500 shares of common stock for cash at $4 per share.
Mar. 1 Issued 5,650 shares of preferred stock for cash at $105 per share.
Apr. 1 Issued 25,000 shares of common stock for land. The asking price of the land was $86,500. The fair value of the land was $83,000.
May 1 Issued 84,500 shares of common stock for cash at $4.25 per share.
Aug. 1 Issued 11,000 shares of common stock to attorneys in payment of their bill of $41,000 for services performed in helping the company organize.
Sept. 1 Issued 10,000 shares of common stock for cash at $6 per share.
Nov. 1 Issued 2,500 shares of preferred stock for cash at $111 per share.

Journalize the transactions. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b. Post to the stockholders’ equity accounts. (Post entries in the order of journal entries presented in the previous part.)

c. Prepare the paid-in capital section of stockholders’ equity at December 31, 2020. (Enter the account name only and do not provide the descriptive information provided in the question.)

Answer 1

Answer and Explanation:

The journal entries, posting and preparation of the paid-in capital section of stockholders’ equity is presented below:

a. The journal entries are shown below:

On Jan 10

Cash $302,000

To Common Stock $151,000 (75,500 shares × $2)

To Paid in Capital in Excess of Stated Value-Common Stock $151,000

(Being the issuance of the common stock is recorded)

On Mar 1

Cash $593,250 (5,650 shares × $105 )

To Preferred Stock $565,000 (5,650 shares × $100 )

To Paid in Capital in Excess of Par-Preferred Stock $28,250

(Being the issuance of the Preferred stock is recorded)

On Apr 1

Land $83,000

To Common Stock $50,000 (25,000 shares × $2)

To Paid in Capital in Excess of Stated Value-Common Stock $33,000

(Being the issuance of the common stock is recorded)

On May 1

Cash $359,125 (84,500 shares × $4.25)

To Common Stock $169,000 (84,500 shares × $2)

To Paid in Capital in Excess of Stated Value-Common Stock $190,125

(Being the issuance of the common stock is recorded)

On Aug 1

Organization expenses $41,000

To Common Stock $22,000 (11,000 shares × $2)

To Paid in Capital in Excess of Stated Value-Common Stock $19,000

(Being the issuance of the common stock is recorded)

On Sep 1

Cash $60,000 (10,000 shares × $6)

To Common Stock $20,000 (10,000 shares × $2)

To Paid in Capital in Excess of Stated Value-Common Stock $40,000

(Being the issuance of the common stock is recorded)

On Nov 1

Cash $277,500 (2,500 shares × $111)

To Preferred Stock $250,000 (2,500 shares × $100)

To Paid in Capital in Excess of Par-Preferred Stock $27,500

(Being the issuance of the common stock is recorded)

b. The T accounts of the above accounts are presented below:

Preferred Stock

Mar 1 $565,000

Nov 1 $250,000

Balance $815,000

Common Stock

Jan 10 $151,000

April 1 $50,000

May 1 $169,000

Aug 1 $22,000

Sep 1 $20,000

Balance $412,000

Paid in capital in excess of par - Preferred stock

Mar 1 $28,250

Nov 1 $27,500

Balance $55,750

Paid in capital in excess of stated value - Common stock

Jan 10 $151,000

April 1 $33,000

May 1 $190,125

Aug 1 $19,000

Sep 1 $40,000

Balance $433,125

c. Now the preparation is presented below:

Bramble Corporation

Balance Sheet Partial

As of December 31, 2020

Stockholders Equity

Capital Stock

Preferred Stock $815,000

Common Stock $412,000

Total Capital Stock $1,227,000 (A)

Additional Paid in capital

Paid in Capital in Excess of Par-Preferred Stock $55,750

Paid in Capital in Excess of Stated Value-Common Stock $433,125

Total Additional Paid in Capital $488,875 (B)

Total Stockholders Equity $1,715,875 (A + B)