Question

Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp.

Great Adventures has authorized $1 par value common stock. When the company began on July 1, 2021, Tony and Suzie each purchased 10,000 shares (20,000 shares total) of $1 par value common stock at $1 per share. The following transactions affect stockholders’ equity during the remainder of 2022:   

November	5		Issue an additional 126,000 shares of common stock for $10 per share.
November	16		Purchase 12,600 shares of its own common stock (i.e., treasury stock) for $28 per share.
November	24		Resell 6,600 shares of treasury stock at $29 per share.
December	1		Declare a cash dividend on its common stock of $14,000 ($0.10 per share) to all stockholders of record on December 15.
December	20		Pay the cash dividend declared on December 1.
December	31		Pay $865,000 for construction of new cabins and other facilities. The entire expenditure is recorded in the Buildings account.

general journal :

no. date. general journal debit credit

1	Nov 05	Cashselected answer correct	1,260,000selected answer correct	not attempted
		Common Stockselected answer correct	not attempted	126,000selected answer correct
		Additional Paid-in Capitalselected answer correct	not attempted	1,134,000selected answer correct
2	Nov 16	Treasury Stockselected answer correct	352,800selected answer correct	not attempted
		Cashselected answer correct	not attempted	352,800selected answer correct
3	Nov 24	Cashselected answer correct	191,400selected answer correct	not attempted
		Treasury Stockselected answer correct	not attempted	184,800selected answer correct
		Additional Paid-in Capitalselected answer correct	not attempted	6,600selected answer correct
4	Dec 01	Dividendsselected answer correct	14,000selected answer correct	not attempted
		Dividends Payableselected answer correct	not attempted	14,000selected answer correct
5	Dec 20	Dividends Payableselected answer correct	14,000selected answer correct	not attempted
		Cashselected answer correct	not attempted	14,000selected answer correct
6	Dec 30	Buildingsselected answer correct	865,000selected answer correct	not attempted
		Cashselected answer correct	not attempted	865,000selected answer correct
7	Dec 31	Service Revenueselected answer correct	865,000selected answer incorrect	not attempted
		Sales Revenueselected answer correct	not attempted	865,000selected answer incorrect
8	Dec 31	Retained Earningsselected answer correct	not attempted	not attempted
		Cost of Goods Soldselected answer correct	0selected answer incorrect	not attempted
		Depreciation Expenseselected answer correct	0selected answer incorrect	not attempted
		Supplies Expenseselected answer correct	0selected answer incorrect	not attempted
		Salaries Expenseselected answer correct	0selected answer incorrect	not attempted
		Bad Debt Expenseselected answer correct	0selected answer incorrect	not attempted
		Interest Expenseselected answer correct	0selected answer incorrect	not attempted
		Rent Expenseselected answer correct	0selected answer incorrect	not attempted
		Income Tax Expenseselected answer correct	0selected answer incorrect	not attempted
		Insurance Expenseselected answer correct	0selected answer incorrect	not attempted
		Repairs and Maintenance Expenseselected answer correct	0selected answer incorrect	not attempted
		Warranty Expenseselected answer correct	0selected answer incorrect	not attempted
		Lossselected answer correct	0selected answer incorrect	not attempted
9	Dec 31	Retained Earningsselected answer correct	14,000selected answer correct	not attempted
		Dividendsselected answer correct	not attempted	14,000

Answer 1

1. Journal entries
Date	Particulars	Debit ($)	Credit ($)
Nov-05	Cash	12,60,000
	Common Stock		1,26,000
	Additional paid in capital		11,34,000
	(Issue of additional 126000 share of common stock for $10 per share (par value of $1)
Nov-16	Treasury stock	3,52,800
	Cash		3,52,800
	(Purchase 12600 shares of its common stock for $28 per share)
Nov-24	Cash	1,91,400
	Treasury stock		1,84,800
	Additional paid in capital		6,600
	(Resell of 6600 treasury stock for $29 per share. Since the treasury shares are sold at higher price than its cost, the difference of $1 per share ($29-$28) is credited to additional paid in capital)
Dec-01	Dividends	11,880
	Dividend payable		11,880
	(Cash dividend is declared)
Dec-20	Dividend payable	14,000
	Cash		14,000
	(Dividend declared on December 1 is paid in cash)
Dec-31	Buildings	8,65,000
	Cash		8,65,000
	(Amount paid for construction of new cabins and other facilities)
Dec-31	Retained earnings	14,000
	Dividends		14,000
	(Dividend reclassified to retained earnings)