Problem 3. Assume that the $50,000 of stock subscribed for at 102 is to be paid for one-half in cash and the remainder in two equal instalments at the end of successive three-month periods.
For the one-half cash payment the entry is as follows:
| Cash | 25,500.00 | ||
| Subscribers | 25,500.00 | ||
| At the end of the first three months, the record is: | |||
| Call No. 1 | 12,750.00 | ||
| Subscribers | 12,750.00 | ||
| To show the call issued. | |||
| Cash | 12,750.00 | ||
| Call No. 1 | 12,750.00 | ||
| To record payment of the first call. | |||
| Similar entries at the end of the second three months are: | |||
| Call No. 2. | 12,750.00 | ||
| Subscribers | 12,750.00 | ||
| Cash | 12,750.00 | ||
| Call No. 2 | 12,750.00 | ||
If the call is not paid in full at balance sheet time, the debit balance in the “Call” accounts constitutes an asset, i.e., the amount of unpaid instalments due from subscribers. Upon full payment of all subscriptions, certificates of stock are issued and recorded as shown on [pages 341, 342].
Entries for Common and Preferred Stock.—Where more than one kind of stock is issued, such as common and one or more kinds of preferred, separate capital stock accounts—and usually other related accounts—should be kept for each class, as illustrated below:
Problem 4. Assume that the stock of a corporation is $200,000 common and $50,000 preferred, and that $100,000 common and $50,000 preferred have been subscribed for. The entries necessary to record the subscription in accordance with the first method explained above, are:
| Subscribers—Capital Stock Common | 100,000.00 | ||
| Capital Stock Common, Subscriptions | 100,000.00 | ||
| Subscribers—Capital Stock Preferred | 50,000.00 | ||
| Capital Stock Preferred, Subscriptions | 50,000.00 | ||
The other entries for payment of subscriptions and issue of stock are essentially the same as explained above, but the record of the transactions affecting common and preferred stock should always be kept distinct and separate.
Entries for No-Par Stock.—When a corporation issues no-par stock, the amount of proprietorship resulting from its sale is exactly what the stock brings and is so recorded; there is neither discount nor premium. Booking it is, therefore, simple. The amount of capital so secured, i.e., secured from its sale, should, however, never be mixed with the accretions to capital from reserved profits or other sources. Such items constitute the Surplus just as in the case of stock of par value, and the legal requirement that these amounts be kept separate from the capital stock are just as strict. This is necessary so that the records will clearly show that dividends have not encroached upon the capital. Since the value at which no-par stock is carried on the books bears no relation to the number of shares issued, it is customary to carry on the balance sheet information as to the number of shares outstanding. The net worth section of the balance sheet of a corporation issuing no-par stock should appear as follows:
| Net Worth | |||
| Represented by: | |||
| Capital Stock—No Par: | |||
| Authorized | 10,000 shares | ||
| Unissued | 3,000 ” | ||
| Issued and Outstanding | 7,000 ” | $369,465.00 | |
| Surplus | 125,479.00 | ||
| Total Net Worth | $494,944.00 | ||