On January 1,2014,DDB agreed to purchase 4,000 of CTC's common shares at $5 per share.Cash payment in full,including 10% interest,is to be paid one year later at which time the shares will be issued.The appropriate journal entry for CTC to record the transaction on January 1,2014,would include a:

Question

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When DDB agrees to purchase the 4,000 common shares from CTC, it is considered a subscription of shares. Since DDB has not yet paid for the shares, it is recorded as "Common Shares Subscribed" on CTC's balance sheet. Therefore, the appropriate journal entry would be a credit to "Common Shares Subscribed" for $20,000. Option A is incorrect because cash is not being received yet, so it cannot be debited. Option C is also incorrect because cash is not being received yet, so it cannot be credited. Option D is not appropriate because the subscription is for $20,000 (4,000 shares x $5 per share), and the interest has not yet accrued, so it cannot be debited to "Subscriptions Receivable" for $18,000.

On January 1,2014,DDB Agreed to Purchase 4,000 of CTC's Common