Question

Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2018, its first year of operations: (Required: Record the journal entries for each of these transactions)

1. January 2 Issues 100,000 shares of common stock for $33 per share.

2. February 6 Issues 2,800 shares of 7% preferred stock for $13 per share.

3. September 10 Repurchases 12,000 shares of its own common stock for $38 per share.

4. December 15 Reissues 6,000 shares of treasury stock at $43 per share.

Required: Record the journal entries for each of these transactions

Answer 1

Date	Account titles and explanation	Debit	Credit
January 2	Cash	$       33,00,000
	Common Stock		$    1,00,000
	Additional paid up capital-Common Stock		$ 32,00,000
	(To record issuance of common stock)
Working:
	Cash received on issuance of common stock	=	1,00,000	x	$          33	=	$       33,00,000
	Common Stock	=	1,00,000	x	$ 1	=	$          1,00,000
	Paid-up capital in excess of Par-Common Stock	=	1,00,000	x	$          32	=	$       32,00,000
Date	Account titles and explanation	Debit	Credit
February 6	Cash	$ 36,400
	Preferred stock		$ 28,000
	Additional paid up capital-Preferred Stock		$ 8,400
	(To record issuance of preferred stock)
Working:
	Cash received on issuance of preferred stock	=	2,800	x	$          13	=	$             36,400
	Common Stock	=	2,800	x	$          10	=	$             28,000
	Paid-up capital in excess of Par-Preferred Stock	=	2,800	x	$ 3	=	$ 8,400
Date	Account titles and explanation	Debit	Credit
September 10	Treasury Stock	$ 4,56,000
	Cash		$ 4,56,000
	(To record repurchase of own common stock)
Working:
	Treasury Stock	=	12000	x	$          38	=	$          4,56,000
Date	Account titles and explanation	Debit	Credit
December 15	Cash	$          2,58,000
	Treasury Stock		$    2,28,000
	Addiitonal paid-up capital-Treasury stock		$        30,000
	(To record sale of treasury stock)
Working:
	Cash received on issuance of treasury Stock	=	6,000	x	$          43	=	$          2,58,000
	Cost of treasury stock	=	6,000	x	$          38	=	$          2,28,000
	Paid-up capital in excess of Par-Treasury Stock	=	6,000	x	$ 5	=	$             30,000