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Item4 25 points Time Remaining 25 minutes 50 seconds00:25:50 Item 4 Time Remaining 25 minutes 50 seconds00:25:50 During its first year of operations, Eastern Data Links Corporation entered into the following transactions relating to shareholders’ equity. The articles of incorporation authorized the issue of 8 million common shares, $1 par per share, and 2 million preferred shares, $50 par per share. Feb. 12 Sold 3 million common shares, for $10 per share. 13 Issued 36,000 common shares to attorneys in exchange for legal services. 13 Sold 77,000 of its common shares and 4,500 preferred shares for a total of $1,020,000. Nov. 15 Issued 405,000 of its common shares in exchange for equipment for which the cash price was known to be $3,928,000. Required: Prepare the appropriate journal entri

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Answer:

Feb.12

Dr Cash 30,000,000

Cr Common stock 3,000,000

Cr Paid in capital in excess of par- Common stock 27,000,000

Feb.13

Dr Legal expenses 360,000

Cr Common stock 36,000

Cr Paid in capital in excess of par- Common stock 324,000

Feb.13

Dr Cash $1,020,000

Cr Common stock 77,000

Cr Paid in capital in excess of par- Common stock 693,000

Cr Preferred stock 225,000

Cr Paid in capital in excess of par- Preferred stock 25,000

Feb.15

Dr Equipment $3,928,000

Cr Common stock 405,000

Cr Paid in capital in excess of par- Common stock 3,523,000

Explanation:

Preparation of the appropriate journal entries

Feb.12

Dr Cash (3 million * $10) 30,000,000

Cr Common stock (3 million * $1) 3,000,000

Cr Paid in capital in excess of par- Common stock 27,000,000

(30,000,000-3,000,000)

(Being To record the sale of 3 million common shares at $10 per share of $1 par value)

Feb.13

Dr Legal expenses (36,000 share * $10) 360,000

Cr Common stock (36,000 share * $1) 36,000

Cr Paid in capital in excess of par- Common stock 324,000

(360,000-36,000)

(Being To record issue of common shares in exchange of legal expenses)

Feb.13

Dr Cash $1,020,000

Cr Common stock (77,000*$1) 77,000

Cr Paid in capital in excess of par- Common stock 693,000

[(77,000*$10)- (77,000*$1)]

Cr Preferred stock (4,500*$50) 225,000

Cr Paid in capital in excess of par- Preferred stock 25,000

[$1,020,000-( 77,000-693,000-225,000)

(Being To record sale of common shares and preferred shares)

Feb.15

Dr Equipment $3,928,000

Cr Common stock (405,000*$1) 405,000

Cr Paid in capital in excess of par- Common stock 3,523,000

($3,928,000-405,000)

(To record issue of 405,000 shares $1 in exchange for equipment)

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