Heavenly Sounds Corp., an electric guitar retailer, was organized by Mickey Blessing, John Frey, and Nancy Stein. The charter authorized 750,000 shares of common stock

Heavenly Sounds Corp., an electric guitar retailer, was organized by Mickey Blessing, John Frey, and Nancy Stein. The charter authorized 750,000 shares of common stock with a par of $20. The following transactions affecting stockholders’ equity were completed during the first year of operations:

a. Issued 45,000 shares of stock at par to John Frey for cash.

b. Issued 400 shares of stock at par to Mickey Blessing for promotional services provided in connection with the organization of the corporation, and issued 60,000 shares of stock at par to Mickey Blessing for cash.

c. Purchased land and a building from Nancy Stein in exchange for stock issued at par. The building is mortgaged for $450,000 for 20 years at 4%, and there is accrued interest of $1,500 on the mortgage note at the time of the purchase. It is agreed that the land is to be priced at $150,000 and the building at $600,000, and that Nancy Stein’s equity will be exchanged for stock at par. The corporation agreed to assume responsibility for paying the mortgage note and the accrued interest.

Journalize the entries to record the transactions.


Answer:















a.
 Cash 900,000
Common Stock (45,000 shares × $20) 900,000
b.
 Organizational Expenses 8,000
Common Stock (400 shares × $20) 8,000
Cash 1,200,000
Common Stock (60,000 shares × $20) 1,200,000
c.
 Land 150,000
Building 600,000
Interest Payable* 1,500
Mortgage Note Payable 450,000
Common Stock (14,925 shares × $20) 298,500
* An acceptable alternative would be to credit Interest Expense.









On May 10, First Lift Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for 3,600 shares of $4 par common stock with a current market price of $28. Journalize the entry to record the transaction.


Answer:









May 10 Land (3,600 shares × $28) 100,800
Common Stock (3,600 shares × $4) 14,400
Paid-In Capital in Excess of Par—
Common Stock [3,600 shares × ($28 – $4)] 86,400