Poole Company began business on January 1, 2015.The corporate charter authorized issuance of 5,000 shares of $1 par value common stock, and 4,000 shares of $8 par value, 6% cumulative preferred stock.None of the preferred shares were issued.On July 1, Poole issued 1,000 shares of common stock in exchange for two years rent on a retail location.The cash rental price is $2,400 per month and the rental period begins on July 1.The correct entry to record the July 1 transaction will

Question

Quizplus · Accepted Answer

The transaction involves the issuance of 1,000 shares of common stock in exchange for two years' rent, which amounts to $57,600 ($2,400 x 24 months). Therefore, the increase in prepaid rent account will be $57,600, while the increase in common stock will be for 1,000 shares at $1 par value, which amounts to $1,000. The additional amount of $56,600 ($57,600 - $1,000) will be recorded as additional paid-in capital-common.

Poole Company Began Business on January 1, 2015