On February 3 the Teel Corporation enters into a subscription contract with several subscribers for 5,000 shares of $10 par common stock at a price of $16 per share. The contract requires a down payment of 25%, with the remaining balance to be paid on May 3. The stock will be issued to each subscriber upon full payment.
Prepare journal entries to record the following:
1. The February 3 receipt of the down payment and signing of the contract.
2. The May 3 receipt of the remaining balance from subscribers to 4,000 shares. The market price is currently $17 per share.
3. The default of a subscriber to 1,000 shares. These shares are sold on the open market for $17 per share on May 4, and the down payment is returned to the subscriber.