Question
Pinnacle Holdings issued stock to investors.
| Date | Event |
|---|
| April 2 | Issued 10,000 shares of $1 par value common stock for $12 per share. |
| April 18 | Issued 2,000 shares of $50 par value, 5% preferred stock for $55 per share. |
Required: Prepare the journal entries. Credit the par values to Common Stock / Preferred Stock and the excess to the matching Paid-in Capital in Excess of Par accounts.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 and IAS 32 — presentation of equity
Equity is presented as its components — share capital, share premium, reserves and retained earnings — and each transaction affects a specific one. Identify the component before the amount, since the totals often agree even when the split is wrong.
Common mistakes
- Merging share premium into share capital.
- Taking a transaction with owners through profit or loss instead of directly to equity.
- Presenting treasury shares as an asset rather than as a deduction from equity.
Further readingPreparing a balance sheet step by step