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Rodriguez Corporation issues 14,000 shares of its common stock for $127,500 cash on February 20. Prepare journal entries to record this event under each of the following separate situations.. 1. The stock has a $18 par value. 2. The stock has neither par nor stated value. 3. The stock has a $9 stated value.

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Answer:

1.                                                        Dr.              Cr.

Cash                                             $127,500

Discount on common stock        $124,500

Add-in Capital Common share                     252,000

2.                                                        Dr.              Cr.

Cash                                             $127,500

Add-in Capital Common share                     127,500

3.

                                                       Dr.              Cr.

Cash                                             $127,500

Additional paid in capital                              $1,500

Add-in Capital Common share                     $126,000

Explanation:

1.

Share issued below par are issued on the discounted value.

Cash received = $127,500

Price per share = $127,500 / 14,000 = $9.11

Add-in capital value = 14,000 x $18 = 252,000

2.

Stock with no par value does not have any discount price or premium price all the amount received in cash is added to add-in capital common share account.

3.

Stated value is the value of stock given to share for accounting purpose only. In this situation common stock value is calculated as

Common stock =  number of shares x stated value = 14,000 x 9 = 126,000  

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