Golden Rams C on is gran ted a charter that authorizes the i

Golden Rams C on is gran ted a charter that authorizes the issuance of 30,000 shares of S50 par value preferred stock and 70,000 shares of no-par common stock. The Board of Directors establishes a stated value of $10 a share for the common stock. Prepare the journal entry to record the following transactions. 1. Golden Rams issued 1,000 shares of common stock to its attorneys for costs associated with starting the corporation. At that time, the common stock was selling at $18 per share 2. Golden Rams issued 10,000 shares of preferred stock are sold for cash at $75 per share. Golden Rams acquired land and building by issuing 30,000 shares of common stock. land was recently appraised at $100,000 and the building was appraised at $350,000.

Solution

Journal Entries in the books of Golden Rams: - Amount in $

1. Since, the shares are issued for incorporation expenses, it shall be debited and share capital shall be credited with number of shares X Face value and excess in Security premium.

Incorporation expenses Dr 18,000

To Share capital Cr 10,000

To Securities Premium Cr 8,000

2. Cash /Bank Dr 7, 50, 000

To Share Capital Cr 5,00,000

To Securities Premium Cr 2,50,000

Since the par value of preferred stock is 50, balance shall be accounted as Securities Premium.

3. On initial acquisition of land and building:

Land Dr 50,000 (assumed)

Building Dr 2,50,000 (assumed)

To Share capital Cr 3,00,000 (30,000 X 10)

On appraisal of values of land and building:

Land Dr 50,000

Building Dr 1,00,000

To Revaluation Reserve Cr 1,50,000.

Though the value of land and buildings are appraised, the appraised value is not realised, it is credited to Revaluation Reserve.