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21 April, 22:58

On January 29, Quality Marble Inc., a marble contractor, issued for cash 75,000 shares of $10 par common stock at $23, and on May 31, it issued for cash 100,000 shares of $4 par preferred stock at $6. a. Illustrate the effects on the accounts and financial statements of the January 29 and May 31 transactions. b. What is the total amount invested (total paid-in capital) by all stockholders as of May 31?

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  1. 22 April, 00:36
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    The correct answer for option (a) is shown below, and for option (b) is $2,325,000

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    (a).

    Jan 29 Cash A/c Dr. $1,725,000 (75,000 * $23)

    To, Common stock A/c. $750,000 (75,000 * $10)

    To Share in excess of par value A/c $975,000 (75,000 * $23-$10)

    May 31 Cash A/c Dr. $600,000 (100,000 * $6)

    To, Preferred stock A/c $400,000 (100,000 * $4)

    To, Preferred stock in excess of par value A/c $200,000 (100,000 * $6 - $4)

    (b). Total amount invested = $1,725,000 + $600,000

    = $2,325,000
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