Question
In: Advanced Math
The stockholders' equity section of the balance sheet appears as follows at January 1, 2014: Common...
The stockholders' equity section of the balance sheet appears as
follows at January 1, 2014:
| Common Stock, $2 par, 2,000 shares issued and outstanding | $4,000 |
| Paid-in Capital in Excess of Par--Common Stock | 1,600 |
| Total Capital Stock | 5,600 |
| Retained Earnings | 5,400 |
| Total Stockholders' Equity | $11,000 |
On March 1, 2014, the company repurchased 800 shares of its common
stock at $12 per share but on April 6, 2014, it reissued 600 shares
of the shares at $20 per share.
A) Prepare the journal entries to record for the March 1 and April 6 transactions.
B) How many shares of common stock are outstanding at March 31,
2014, and April 30, 2014, respectively?
March 31, 2014: $
April 30, 2014: $
Solutions
Expert Solution
We know that a Journal Entry is basically a form of '' diary '' of a businessman in which he records the daily transactions made by him . A journal entry basically consist of two terms Debit (Dr) and Credit (Cr) . Debit is used to represent an increase in account while Credit represents any decrease in account .
Now , Since on March 1 , 2014 , company purchased 800 shares at $12 per share i.e., company purchased shares of $9600 i.e., the company has paid $9600 in purchasing the shares .
So , this is recorded in Journal entry as -
| Dr. | Purchase ( shares ) | $9600 |
| Cr. | Cash | $9600 |
Similarly , on April 6 , 2014, company issued 600 shares at $ 20 per share i.e., company issued shares of $12000 i.e., the company received $ 12000 in issuing the shares .
So , this is recorded in Journal entry as -
| Dr. | Cash | $12000 |
| Cr. | Shares | $12000 |
(B) Since , on January 1 , 2014 ,
Common stock outstanding = 2000 shares at $2 per share = $ 4000
On March 1 , 2014 company purchased 800 shares but issued none ,therefore on March 31 , 2014 its Common Stock Outstanding remains unchanged i.e., $4000 and Paid - capital in excess of par - common stock increases by $ 9600 , and becomes $1600+ $9600 = $11200
While on April 6 , company issued 600 shares at $20 per share , therefore , its outstanding common stock increases by $12000 , and becomes $4000 + $12000 = $16000
Hence , we have ,
Outstanding Common stock -
March 31 , 2014 = $4000
April 30 , 2014 = $16000
Colby Messinger answered 2 years agoRelated Solutions
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