Question

Q#1: As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients.

		1. Ayayai Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 3,500 shares of its $19 par value common stock. The owners’ asking price for the land was $133,500, and the fair value of the land was $119,000.
		2. Whispering Winds Corporation is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,000 shares of its $11 par value stock. At the time of the exchange, the land was advertised for sale at $273,000. The stock was selling at $12 per share Q#2: On January 1, 2020, the stockholders’ equity section of Bramble Corporation shows common stock ($6 par value) $1,800,000; paid-in capital in excess of par $1,050,000; and retained earnings $1,230,000. During the year, the following treasury stock transactions occurred. Part A: Mar. 1 Purchased 51,000 shares for cash at $15 per share. July 1 Sold 12,000 treasury shares for cash at $17 per share. Sept.   1 Sold 10,000 treasury shares for cash at $14 per share. Part B: Restate the entry for September 1, assuming the treasury shares were sold at $12 per share.

Answer 1

Question 1:

The journal entries are provided as below:

Event	Account Titles	Debit	Credit
1	Land	$119,000
	Common Stock (3,500*19)		$66,500
	Paid-in Capital in Excess of Par-Common Stock (119,000 - 66,500)		$52,500
2	Land	$228,000
	Common Stock (19,000*11)		$209,000
	Paid-in Capital in Excess of Par-Common Stock [19,000*(12-11)]		$19,000

_____

Question 2:

Part A:

The journal entries are given as follows:

Event	Account Titles	Debit	Credit
Mar.1	Treasury Stock (51,000*15)	$765,000
	Cash		$765,000
Jul.1	Cash (12,000*17)	$204,000
	Treasury Stock (12,000*15)		$180,000
	Paid-in Capital from Treasury Stock (12,000*2)		$24,000
Sept.1	Cash (10,000*14)	$140,000
	Paid-in Capital from Treasury Stock (10,000*1)	$10,000
	Treasury Stock (10,000*15)		$150,000

____

Part B:

The journal entry for Sept.1 is restated as below:

Event	Account Titles	Debit	Credit
Sept.1	Cash (10,000*12)	$120,000
	Paid-in Capital from Treasury Stock	$24,000
	Retained Earnings	$6,000
	Treasury Stock (10,000*15)		$150,000