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Bella Donna Company has 100,000 shares of $4 par common stock issued and outstanding as of...

Bella Donna Company has 100,000 shares of $4 par common stock issued and outstanding as of January 1, 2018. The shares were originally issued for $9 per share. On February 3, 2018, Bella Donna repurchased 3,690 shares at $6 per share for the purposes of retiring them. What will be the balance in Paid in capital in excess of par after February 3rd transaction?

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Date General Journal Debit Credit
January 1, 2018 Cash $900,000
Common stock $400,000
Pain in capital, in excess or par $500,000
February 3, 2018 Treasury stock $23,760
Cash $23,760
February 3, 2018 Common stock $15,840
Paid in capital, in excess of par $7,920
Treasury stock $23,760

On January 1, 2018 when shares are issued, paid in capital in excess of par is credited by = Number of shares issued x ( issue price per share - Par value per share)

= 100,000 x (9-4)

= $500,000

On February 3, 2018 when shares are retired, common stock will be debited by par value of shares i.e $4 per share.

Share have been repurchased at $6 per share, thus remaining $2 per share will be debited to paid in capital in excess of par.

Thus, common stock will be debited on February 3 by = 3,690 x 4

= $15,840

paid in capital in excess of par will be debited of February 3 by = 3,690 x 2

= $7,920

paid in capital in excess of par balance after February 3 transaction = 500,000 - 7,920

= $492,080

Kindly comment if you need further assistance.

Thanks‼!

ekkarill92 answered 1 month ago
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