Beauty Island Corporation began operations on April 1 by issuing 60,000 shares of $5 par value common stock for cash at $13 per share. On April 19, it issued 2,000 shares of common stock to attorneys in settlement of their bill of $27,500 for organization costs. In addition, Beauty Island issued 1,000 shares of $1 par value preferred stock for $6 cash per share. Journalize the issuance of the common and preferred shares, assuming the shares are not publicly traded. (Record journal entries in the order presented in the problem.)

1. Cash  Dr, $780,000  (60,000 × $13)

Common Stock Dr, $300,000  (60,000 × $5)  

        To Paid-in Capital in Excess of par, Common Stock $1,80,000

(Being issuance of 60,000 shares at $13 per share is recorded)

2. Organization costs Dr, $27,500

      To Common Stock $5,000  (1,000 × $5)  

       To Paid-in Capital in Excess of par, Common Stock $22,500

(Being issuance of 1,000 shares for attorney's fees is recorded)

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Answer and Explanation:

The Journal entry is shown below:-

1. Cash  Dr, $780,000

(60,000 × $13)

Common Stock Dr, $300,000

(60,000 × $5)  

       To Paid-in Capital in Excess of par, Common Stock $1,80,000

(Being issuance of 60,000 shares at $13 per share is recorded)

2. Organization costs Dr, $27,500

      To Common Stock $5,000

(1,000 × $5)

        To Paid-in Capital in Excess of par, Common Stock $22,500

(Being issuance of 1,000 shares for attorney's fees is recorded)

b is the correct answer