Question

Mesa Company is authorized to issue 1,000,000 shares of its $5 par value common stock and 600,000 shares of its $10 par value preferred stock. During 2018 – its first year of business - the company earned $650,000 of net income and had the following select transactions. No dividends were declared or paid throughout the year. The net income and events below are the only ones that impact Stockholders’ Equity this year.

1. Issued 300,000 shares of common stock for $35 per share
2. Issued 100,000 shares of preferred stock for $55 per share
3. Reacquired 80,000 shares of common stock at $30 per shares
4. Reissued 20,000 shares from treasury for $33 per share
5. Reissued 10,000 shares from treasury for $35 per share
6. Reissued 20,000 shares from treasury for $25 per share
7. Reissued 5,000 shares from treasury for $27 per share

Required: Prepare journal entries OR a financial statements effects template to record the above transactions.

Answer 1

Treasury Stock : It is the stock which is reacquired by the company and has not been retired. When the treasury stock is issued above the cost at which the treasury stock is acquired, the difference between the issue price of treasury stock and cost of treasury stock is credited Paid in Capital Treasury Stock and treasury stock is credited at cost price. When the treasury stock is issued below the cost at which the treasury stock is acquired, the difference between the issue price and cost of treasury stock is debited Paid in Capital Treasury Stock and treasury stock is credited at cost price

Sr.No.	Account Title	Debit	Credit
a	Cash	$10,500,000		[300000 x $35]
	Common Stock		$1,500,000	[300000 x $5]
	Paid in Capital in Excess of Par- Common Stock		$9,000,000	[300000 x $30]
	(To record issue of common stock)
b	Cash	$5,500,000		[100000 x $55]
	Preferred Stock		$1,000,000	[100000 x $10]
	Paid in Capital in Excess of Par- Preferred Stock		$4,500,000	[100000 x $45]
	(To record issue of preferred stock)
c	Treasury Stock	$2,400,000		[80000 x $30]
	Cash		$2,400,000
	(To record repurchase of treasury stock)
d	Cash	$660,000		[20000 x $33]
	Treasury Stock		$600,000	[20000 x $30]
	Paid in Capital Treasury Stock		$60,000	[20000 x $3]
	(To record reissue of treasury stock)
e	Cash	$350,000		[10000 x $35]
	Treasury Stock		$300,000	[10000 x $30]
	Paid in Capital Treasury Stock		$50,000	[10000 x $5]
	(To record reissue of treasury stock)
g	Cash	$500,000		[20000 x $25]
	Paid in Capital Treasury Stock	$100,000		[20000 x $30]
	Treasury Stock		$600,000	[20000 x $30]
	(To record reissue of treasury stock)
h	Cash	$135,000		[5000 x $27]
	Paid in Capital Treasury Stock	$15,000		[5000 x $3]
	Treasury Stock		$150,000	[5000 x $30]
	(To record reissue of treasury stock)
h	Income Summary	$650,000
	Retained Earnings		$650,000
	(To transfer net income to retained earnings)