Question

The following information pertains to stock transactions of Hawk, Inc. during 2019.

On 1/11/2019, Hawk issued 1,000,000 shares of common stock for $110/share. Its par is $100/share.

On 7/1/2019, Hawk reacquired 150,000 shares of its common stock at $96/share.

On 7/15/2019, Hawk reacquired 80,000 shares of its common stock at $98/share.

On 8/1/2019, Hawk sold 90,000 shares of the treasury stock for $101/share.

On 11/1/2019, Hawk sold 120,000 shares of the stock reacquired for $90/share.

On 12/31/2019, Hawk retired the remaining 20,000 shares of the stock reacquired.

Instructions: Prepare any necessary journal entries for the above transactions using the FIFO flow

assumption and

• the cost method
• the par value method

Answer 1

Solution:
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
	1/11/2019	Cash	$11,00,00,000
		Common Stock (1,000,000 Shares X $ 100)		$10,00,00,000
		Paid in capital in excess of par - Common Stock		$1,00,00,000
	07/01/2019	Treasurry stock (150,000 Shares X $ 96)	$1,44,00,000
		Cash		$1,44,00,000
	07/15/2019	Treasurry stock (80,000 Shares X $ 98)	$78,40,000
		Cash		$78,40,000
	08/01/2019	Cash (90,000 Shares X $ 101)	$90,90,000
		Treasurry Stock (90,000 X $ 96)		$86,40,000
		Addittional Paid in Capital - Treasurry Stock		$4,50,000
	11/01/2019	Cash (120,000 Shares X $ 90)	$1,08,00,000
		Addittional Paid in Capital - Treasurry Stock	$4,50,000
		Retained Earnings (Balance Amt)	$3,90,000
		Treasurry Stock (60,000 Shares X $ 96)		$1,16,40,000
		Note: (Value of TS = 60,000 Sh X $ 98 + 60,000 Sh X $ 96) = $ 11,640,000
		Shares Retire at Cost Method :
	12/31/2019	Share Capital (20,000 Shares X $ 100)	$20,00,000
		Treasurry Stock (20,000 X $ 98)		$19,60,000
		Addittional Paid in Capital - Common Stock		$40,000