In: Accounting
create a scenario for 3 separate transactions that address the following issues as accounting journal entries
1) | ||
Account Titles | Debit | Credit |
Corp. issues 5,000 shares of $10 par value common stock at $14 per share | ||
Cash (5000 x 14) | $ 70,000 | |
Common stock (5000 x 10) | $ 50,000 | |
Paid-in Capital in Excess of Par Value (5000 x (14-10) | $ 20,000 | |
If common stock is issued for an amount greater than par value, the excess should be credited to Paid-in Capital in Excess of Par Value. | ||
2) | ||
Company can issue non-monetary dividend to its shareholders other than cash .. The property dividend would be recorded against the current market price of the asset distributed, any increase and decrease in market value above or below the book value it would either incur profit or loss . The interpretation of market value of the distributed asset may force businesses to intentionally issue the property dividend to manipulate the taxable income. | ||
The company originally acquired the marketable securities for $500,000, and they have a fair market value as of the date of dividend declaration of $ 4,000,000. | ||
Account Titles | Debit | Credit |
Marketable Securities (4,000,000 - 500,000) | $ 3,500,000 | |
Gain on Marketable Securities | $ 3,500,000 | |
Debit | Credit | |
Retained Earnings | $ 4,000,000 | |
Property Dividends Payable | $ 4,000,000 | |
(on declaration) | ||
Debit | Credit | |
Dividends Payable | $ 4,000,000 | |
Marketable Securities | $ 4,000,000 | |
distribution of the property dividend to shareholders | ||
3) | ||
The repurchased shares of stock are known as treasury stock.The shares in treasury stock may be reissued any time. | ||
If treasury stock is reissued at a price above cost | ||
Company reissues 1,000 shares out of its treasury stock at $110 per share purchased at $ 80 per share | ||
Account Titles | Debit | Credit |
Cash (110 x 1000) | $ 110,000.00 | |
Treasury Stock | $ 80,000.00 | |
Additional paid-in capital - Treasury (1000 x (110-80) | $ 30,000.00 | |
If treasury stock is reissued at a price below cost: | ||
Company reissues 1,000 shares out of its treasury stock at $80 per share purchased at $ 100 per share | ||
Account Titles | Debit | Credit |
Cash (80 x 1000) | $ 80,000.00 | |
Additional paid-in capital - Treasury (1000 x (80-100) | $ 20,000.00 | |
Treasury Stock | $ 100,000.00 | |