On January 1, Maxine Corp

question 75

Essay

On January 1, Maxine Corp. entered into a subscription contract for 100 shares of its $20 par common stock at a price of $50 per share. The contract required each subscriber to make an immediate down payment of $10 and two
$20 payments on February 1 and March 1. All the down payments were received on January 1 and all the installments due on February 1 were received on February 1. On March 1, the rest of the payments were received except the payment from one subscriber of ten shares, who defaulted. These shares were later sold for $40 per share. An amount necessary to bring the proceeds up to the total subscription price was retained and the balance of the payments received from the defaulted subscriber was returned.
Required:
a. List the two shareholders' equity credits in the January 1 journal entry.

b. Prepare the journal entries for the receipt of cash and the issuance of stock on
March 1.
c. Prepare the journal entry completing the transaction with the defaulted subscriber, after the defaulted shares were sold.