The preparation of the journal entry to record the accounting transaction can be seen in the table below.
Initially, when preparing a journal, you have to read the transaction carefully and comprehend it. Discover which accounts need to be credited and debited before entering a journal entry.
From the given information:
The common stock par value = no of shares × par value of shares
The common stock par value = 4000 shares × $5/ share
The common stock par value = $20000
However, the amount paid in capital excess of the par value for the common stock is:
= $35000 - $20000
= $15000
Therefore, the Journal entry can be computed as follows:
Date Account Title Post Ref Debit ($) Credit ($)
Cash 35,000
Paid-in capital in excess of par
value, common stock 20,000
(To record the insurance of common stock)
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