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Tamarisk, Inc. began operations on April 1 by issuing 51,000 shares of $4 par value common stock for cash at $20 per share. On April 19, it issued 2,000 shares of common stock to attorneys in settlement of their bill of $26,300 for organization costs. In addition, Tamarisk issued 900 shares of $2 par value preferred stock for $6 cash per share. Journalize the issuance of the common and preferred shares, assuming the shares are not publicly traded.

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Answer:

Tamarisk, Inc.

Journal Entries:

April 1:

Debit Cash Account $1,020,000

Credit Common Stock $204,000

Credit Paid-in Capital In Excess $816,000

To record the issue of 51,000 $4 par value common stock shares at $20 per share.

April 19:

Debit Organization Expense $26,300

Credit Common Stock $8,000

Credit Paid-in Capital In Excess - Common Stock $18,300

To record the issue of 2,000 shares in settlement of attorneys' organization costs.

April 19:

Debit Cash Account $5,400

Credit Preferred Stock $1,800

Credit Paid-in Capital In Excess -Preferred Stock $3,600

To record the issue of 900 shares of $2 par value preferred stock for $6 cash.

Explanation:

Tamarisk, Inc. uses the general journal entries to record business transactions as they occur on a daily basis.  Journal entries are the first set of records in the accounting books.  They identify the accounts to be debited and the accounts to be credited in the general ledger.