Scribd
Upload
146 views

Common Stock and Treasury Stock Tutorial

The document discusses several examples of common stock issuances and treasury stock transactions. It provides the journal entries for: 1) The issuance of common stock for cash by two different companies, one with par value stock and one with no-par value stock. 2) Several issuances of common stock for cash and for property (a building and inventory). 3) A scenario where stock is subscribed for but the subscriber defaults, and the journal entries if shares are issued proportionally or if payments are returned. 4) The effects of three treasury stock transactions - a purchase, and two resales - on key financial statement line items.

Uploaded by

Salma Hazem
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
146 views

Common Stock and Treasury Stock Tutorial

The document discusses several examples of common stock issuances and treasury stock transactions. It provides the journal entries for: 1) The issuance of common stock for cash by two different companies, one with par value stock and one with no-par value stock. 2) Several issuances of common stock for cash and for property (a building and inventory). 3) A scenario where stock is subscribed for but the subscriber defaults, and the journal entries if shares are issued proportionally or if payments are returned. 4) The effects of three treasury stock transactions - a purchase, and two resales - on key financial statement line items.

Uploaded by

Salma Hazem
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Common Stock Issuance

Quick Study 13-5

Prepare the issuer’s journal entry for each separate transaction that follows. (a) On March 1,
Edgar Co. issues 44,500 shares of $4 par value common stock for $255,000 cash. (b) on April 1,
GT Co. issues no-par value common stock for $50,000 cash.

Solution

(a) Mar. 1 Cash............................................................................................255,000


Common Stock, $4 Par Value............................................... 178,000
Additional Paid-in Capital in Excess of Par
Value, Common Stock........................................................ 77,000
Issued par value stock for cash.

(b) Apr. 1 Cash............................................................................................. 50,000


Common Stock, No-Par Value.............................................. 50,000
Issued no-par value stock for cash.

Exercise

Jan 2 Issued 200,000 shares of $5 par value common stock for $12 cash per share.
Jan 3 Issued 100,000 shares of common stock in exchange for a building valued at $820,000
and merchandise inventory valued at $380,000.
Jan 5 Issued 100,000 shares of common stock for $15 cash per share.

Solution

Jan 2 Cash……………………………… 2,400,000


Common Stock………………………. 1,000,000
Paid-In Capital……………………….. 1,400,000

Jan 3 Building………………………….. 820,000


Inventory………………………… 380,000
Common Stock……………………….. 500,000
Paid-In Capital………………………... 700,000

Jan 5 Cash…………………………….. 1,500,000


Common Stock……………………….. 500,000
Paid-In Capital……………………… 1,000,000
Exercise
Pipe Pig Inc. sells its common stock on a subscription basis. On September 29, 2018, an
individual subscribed to 1,000 shares at a subscription price of $25.00 per share. The par value
per share is $1.50. After making payments totaling $15,000, the individual defaulted.
(a) Record the original journal entry before the default scenario.
(b) If the firm issues shares in proportion to the payment made, how many shares would be
issued to the subscriber and how would the common stock account be recorded?
(c) Record the journal entry if the firm returns all payments to the subscriber.

Solution
A
Cash……………………………………………………………..15,000
Stock Subscriptions Receivable…………………………………10,000
Common Stock Subscribed………………………………………1,500
APC-CS…………………………………………………………23,500

B
15,000/25 = 600 shares
Common stock = 600 shares X 1.50 par = $900

C
Common Stock Subscribed……………………………………..1,500
APC-CS………………………………………………………..23,500
Stock Subscriptions Receivable……………………………….10,000
Cash……………………………………………………………15,000

E15-7 (Effect of Treasury Stock Transactions on Financials)

Joe Dumars Company has outstanding 40,000 shares of $5 par common stock which had been
issued at $30 per share. Joe Dumars then entered into the following transactions.

1. Purchased 5,000 treasury shares at $45 per share.


2. Resold 2,000 of the treasury shares at $49 per share.
3. Resold 500 of the treasury shares at $40 per share.

Instructions

Use the following code to indicate the effect each of the three transactions has on the financial
statement categories listed in the table below, assuming Joe Dumars Company uses the cost
method (I = Increase; D = Decrease; NE = No effect).

# Assets Liabilities Equity Paid-in Capital Retained Earnings Net Income


1
2
3
Solution

Stockholders’ Paid-in Retained Net


# Assets Liabilities Equity Capital Earnings Income
1 D NE D NE NE NE
2 I NE I I NE NE
3 I NE I D NE NE

You might also like