On-line Learning Corporation obtained a charter at the start of 2011 that authorized 52,000 shares of nopar

Question:

On-line Learning Corporation obtained a charter at the start of 2011 that authorized 52,000 shares of nopar common stock and 23,000 shares of preferred stock, par value $10. The corporation was organized by four individuals who purchased 16,000 shares of the common stock. The remaining shares were to be sold to other individuals at $37 per share on a cash basis. During 2011, the following selected transactions occurred:

a. Collected $20 per share cash from the four organizers and issued 5,000 shares of common stock to each of them.

b. Sold and issued 6,000 shares of common stock to an outsider at $40 cash per share.

c. Sold and issued 7,000 shares of preferred stock at $30 cash per share.

Required:

1. Give the journal entries indicated for each of these transactions.

2. Is it ethical to sell stock to outsiders at a higher price than the amount paid by the organizers?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...