Quay Co. had the following transactions during the current period. Mar. 2 Issued 5,000 shares of $6 par value common stock to attorneys in payment of a bill for $35,600 for services performed in helping the company to incorporate. June 12 Issued 61,900 shares of $6 par value common stock for cash of $440,900. July 11 Issued 2,075 shares of $120 par value preferred stock for cash at $140 per share. Nov. 28 Purchased 1,600 shares of treasury stock for $82,500. Journalize the transactions.

Answer and Explanation:

The Journal entry is shown below:-

1. Organization expense Dr, $35,600

           To Common stock $30,000 (5,000 × $6)

           To Addition paid in capital-common stock $5,600

(Being issue of common stock for payment of organization fees is recorded)

Here for recording this we debited the organizations expenses as there is a rise in  assets and at the same time it also increased the overall stockholder equity so common stock and the additional paid in capital for common stock is credited

2. Cash Dr, $440,900

      To Common stock $371,400     (61,900 × $6)

       To Addition paid in capital-common stock $69,500

(Being issue of common stock is recorded)

Here For recording this we debited the cash as there is a rise assets and at the same time it also increased the overall stockholder equity so common stock and the additional paid in capital for common stock is credited

3. Cash Dr, $290,500    ($2,075 × $140)

     To Preferred stock $249,000   ($2,075 × $120)

      To Addition paid in capital-Preferred stock $41,500

(Being issue of preferred stock is recorded)

Here For recording this we debited the cash as it increased assets and at the same time it also increased the overall stockholder equity so preferred stock and the additional paid in capital for common stock is credited

4. Treasury stock Dr, $82,500

                To Cash $82,500

(Being repurchase of own stock is recorded)

Here For recording this we debited the treasury stock as it decreased the stockholder equity and credited the cash as it reduced the assets