Daris Corporation is authorized to issue 1,000,000 shares of $5 par value common stock During 2018. its first year of operation, the company has the following stock transactions
per share
Jan 1 Paid the state RM2,000 for incorporation fees
Jan 15 Issued 500.000 shares of stock at RM7
Jan
30 Attorneys for the company accepted 500 shares of common stock as payment for
legal services rendered in helping the company incorporate. The legal services are
estimated to have a value of RM8.000
July 2 Issued 100,000 shares of stock for land. The land had an asking price of
RM900.000. The stock is currently selling on a national exchange at RMS per
share
Sept 5 Purchased 15,000 shares of common stock for the treasury at RM10 per share
Dec 6 Sold 11,000 shares of the treasury stock at RM11 per share
Required:
Journalize the transactions for Daris Corporation

Daris Corporation

General Journal:

Jan. 1:

Debit Incorporation fees RM2,000

Credit Cash Account RM2,000

To record the payment of incorporation fees to the state.

Jan. 15:

Debit Issue of Shares RM3,500,000

Credit Common Stock RM3,500,000

To record issue of 500,000 shares at RM7 per share.

Jan. 30

Debit Legal Fees RM8,000

Credit Issue of Shares RM3,500

Credit Additional Paid-in Capital RM4,500

To record the issue of 500 shares to settle legals fees of RM8,000

July 2:

Debit Land RM900,000

Credit Issue of Share RM700,000

Credit Additional Paid-in Capital RM200,000

To record the issue of 100,000 shares of stock for land.

Sept. 5:

Debit Treasury Stock RM105,000

Debit Additional Paid-in Capital RM45,000

Credit Cash Account RM150,000

To record the repurchase of 15,000 shares of common stock at RM10 per share.

Dec. 6:

Debit Cash Account RM121,000

Credit Treasury Stock RM77,000

Credit Additional Paid-in Capital RM44,000

To record the resale of 11,000 shares of the treasury stock at RM11 per share.

Explanation:

The Additional Paid-in Capital (APIC) or sometimes referred to as Excess Capital over Par Value is an equity account where the above and below par value of the sale and repurchase of stock is recorded.  This makes the Stock account to maintain a stable figure.  This implies that the changes caused by above and below par value is taken care in this account.  It also takes care of treasury stock above and below par value sale.

Treasury stock is a common stock contra account.  It means that the value of the treasury stock reduces the value of the common stock.  There are two methods for treating the above and below par value in treasury stock.  One method is the costing method which records the changes in the treasury stock account.  The other method is the par value method.  With this method, only the par value of treasury stock is recorded in the account.  The above and below par value changes are recorded in the Additional Paid-in Capital account.

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