Various Journal Entries

Sapp Company is authorized to issue 20,000 shares of no-par, $5 stated-value common stock and 5,000 shares of 9%, $100 par preferred stock. It enters into the following transactions:

1. Accepts a subscription contract to 7,000 shares of common stock at $42 per share and receives a 30% down payment.

2. Collects the remaining balance of the subscription contract and issues the common stock.

3. Acquires a building by paying $23,000 cash and issuing 2,000 shares of common stock and 600 shares of preferred stock. Common stock is currently selling at $46 per share; preferred stock has no current market value. The building is appraised at $180,000.

4. Sells 1,000 shares of common stock at $45 per share.

5. Sells 900 shares of preferred stock at $112 per share.

6. Declares a two-for-one stock split on the common stock, reducing the stated value to $2.50 per share.

Prepare journal entries to record the preceding transactions.

(1)	Cash	$????
	Subscription Receivable	$????
	Common Stock Subscribed		$????
	Additional Paid-in Capital on Common Stock		$????
(2)	Cash	$????
Receive Cash	Subscription Receivable		$????
Issue Stock	Common Stock Subscribed	$????
	Common Stock, $5 stated value		$????
(3)	Building	$????
	Common Stock, $5 stated value		$????
	Additional Paid-in Capital on Common Stock		$????
	Preferred Stock, $100 par		$????
	Additional Paid-in Capital on Preferred Stock		$????
	Cash		$????
(4)	Cash	$????
	Common Stock, $5 stated value		$????
	Additional Paid-in Capital on Common Stock		$????
(5)	Cash	$????
	Preferred Stock, $100 par		$????
	Additional Paid-in Capital on Preferred Stock		$????

Hints:

1. If stock is issued on a subscription basis you should:

a. record a debit to Cash for the subscription price received

b. record a debit to Subscriptions Receivable (a contra-equity account) for any cash not yet received

c. record a credit to Stock Subscribed (a contributed capital account) for the par value of the subscribed shares that have not yet been issued

d. record a credit to Additional Paid-in Capital for any excess of the subscription price

2. When the corporation receives payment, you should debit Cash and credit the Subscriptions Receivable account. Once the corporation has received full payment for the subscription, it makes a journal entry to transfer the balance in the Common (or Preferred) Stock Subscribed account to the Common (or Preferred) Stock account, and issues stock certificates for the number of subscribed shares fully paid for by the investor.

3. If a company issues capital stock for services or assets other than cash, you should record the transaction at the fair value of the stock issued or the noncash consideration received, whichever is more representationally faithful.

4. When a company issues common stock for cash, you should record the total par value (Number of Shares * Par Value per Share) in the Common Stock account, with any excess recorded as Additional Paid-in Capital. You should treat common stock issued with a stated value in the same manner.

5. When a company issues preferred stock for cash, you should record the total par value (Number of Shares * Par Value per Share) in the Preferred Stock account, with any excess recorded as Additional Paid-in Capital.