Question

During 2019, Road Pavement Corp. engaged in the following selected transactions:
Issued 25,000 shares of $3 par value common stock at $7 per share.
Re-acquired 1,000 shares of common stock sold in Jan for $6 per share.
Sold 400 shares of its re-acquired common stock purchased in June for $9 per share.
The Board of Directors declared and recorded a cash dividend of $0.20 per share outstanding to its share holders.
Paid the cash dividend declared in September.
Issued another 5,000 shares of common stock at $10 per share.
Required:
Record the Journal Entries for the above transactions: Prepare the Stockholders Equity Section of the Balance Sheet if the Retained Earnings at the end of the year has a balance of $125,000.

Answer 1

Solution: A
	Journal Entries
	Sr. No.	Date	Account Title and explanation	Debit	Credit
	1	----	Cash(25,000 Shares X $ 7)	$1,75,000
			Common Stock (25,000 X $ 3)		$75,000
			Paid in Capital in excess of par- Common		$1,00,000
			(Record the issue of Common stock)
	2	Jan	Treasurry stock (1000 shares X $ 6)	$60,000
			Cash		$60,000
			(To Record the purchase of treasurry Stock)
	3	"June	Cash (400 Shares X $ 9)	$3,600
			Treasurry Stock (400 Shares X $ 6)		$2,400
			Addittional Paid in Capital - Treasurry Stock		$1,200
			(To record the resold of treasury stock)
	4	----	Retained Earnings(24,400 Shares X $ 0.20)	$4,880
			Dividend Payable		$4,880
			(Record the dividend payable)
	5	Sept	Dividend Payable	$4,880
			Cash		$4,880
			(Record the dividend paid)
			Cash(5,000 Shares X $10)	$50,000
	6	----	Common Stock (5,000 Shares X $ 3)		$15,000
			Paid in Capital in excess of par- Common		$35,000
			(Record the issue of Common stock)
Solution: B
			STOCKHOLDER'S EQUITY
			Contributed Capital
			Common Stock, 30,000 Shares of $ 3 par value issued	$90,000
			Addittional Paid in Capital - Common Stock	$1,35,000
			Addittional Paid in Capital - Treasury Stock	$1,200
			Total Contributed Capital	$2,26,200
			Retained Earnings	$1,25,000
			Total	$3,51,200
			Less: Treasury Stock (600 Shares @ $ 6)	$3,600
			Total Stockholder's Equity	$3,47,600