Corporate Formation You have a great idea and want to form a

Corporate Formation You have a great idea and want to form a corporation to produce and sell hot air balloons. You think this is the next big opportunity in air travel. You go to the bank to obtain a loan. Your banker gives you the cold shoulder and turns down your loan application. You talk to family and friends about your idea of forming a corporation. However, they think you are full of hot air and will not lend nor invest in your venture. If you can find investors the corporation will have 100,000 shares of authorized common stock with a $1.00 par value. You decide to raise funds online via Crowd Funding\" There are a number of ways to raise money in the formation of the corporation via \"Crowd Funding\". Journalize each of the following I. The funds received do not have to be returned and the contributor does not receive stock the company nor merchandise. The corporation receives $100,000 from the generosity in of the contributors. 2. The contributors paid S100,000 and received a total of 60,000 shares of common stock. 3. The contributors paid $100,000 and receive hot air balloon kits that cost the corporation $52,000. The contributors paid $100,000 and when production begins the contributors will receive hot air balloon kits. 4· 5. The contributors paid $100,000 and the corporation is required to repay the funds out of earnings of the business plus interest of 3% per year.

Solution

Journal Entry

Journal Entry

S. no

Particulars

Debit

Credit

1

Cash

To Crowdfunding Control Account

(Being Cash received from contributors)

100,000

100,000

2

Cash

To Common Stock at par value

To Excess of issue price over par value.

(Being cash received against common stock at premium)

100,000

60,000

40,000

3

Cash

To Inventory (Hot air kits)

To Profit on kits

100,000

52,000

48,000

4

Cash

To Accounts Payable

100,000

100,000

5

Cash

To Crowdfunding Payable

100,000

100,000

S. no	Particulars	Debit	Credit
1	Cash To Crowdfunding Control Account (Being Cash received from contributors)	100,000	100,000
2	Cash To Common Stock at par value To Excess of issue price over par value. (Being cash received against common stock at premium)	100,000	60,000 40,000
3	Cash To Inventory (Hot air kits) To Profit on kits	100,000	52,000 48,000
4	Cash To Accounts Payable	100,000	100,000
5	Cash To Crowdfunding Payable	100,000	100,000