Question

Problem 3 The following information is provided from the Forza Corporation’s accounting records. ​ 1) Issued 10,000 shares of $1 par common stock at $25 a share. 2) In order to prevent a hostile takeover the company reacquired 7,500 shares for $20 per share as treasury stock. 3) The hostile takeover did not succeed, and the company reissued 5,500 of the treasury shares of $21 per share. 4) The remaining treasury shares were reissued for $22 per share and an additional 2,000 shares were issued at the same price. ​ Prepare the journal entries for the stock transactions, using the cost method assumption to account for the treasury stock.

Date	Account Titles	Debit	Credit

Answer 1

Ans:

Event	Account Title And Explanation	Debit	Credit
1
	Cash	250,000		(10,000*25)
	Common Stock		$ 10,000	10000*1
	Additional Paid in Capital		$ 240,000
	(recording of Issue of 2,500 shares of $1 par common stock at $23 a share)
2	Treasury Stock	$ 150,000		7500*20
	Cash		$ 150,000
	(recording of requisition of the 7,500 shares for $20 per share as treasury stock)
3	Cash	$ 115,500		5500*21
	Treasury Stock		$ 110,000	5500*20
	Additional Paid in Capital		$ 5,500
	(recording of reissue of 5500 of the treasury shares at $21 per share)
4	Cash	$ 88,000		4000*22
	Treasury Stock		$ 40,000	2000*20
	Common stock		$ 2,000	2000*1
	Additional Paid in capital		$ 46,000
	(recording of reissue of 2000 treasury shares and 2000 Common shares at $22)