Question

1. On January 1, 2015, Tahi Inc. incorporated in the state of NY. At the time of incorporation, Jackpot’s board of directors authorized up to 10,000 shares of $1 par value stock. Prepare Tahi’s journal entry (if necessary).  

2. On January 10, 2015, Tahi Inc. issued 5000 shares of $1 par value common stock for $25,000. Prepare Tahi’s journal entry (if necessary).  

3. On April 26, 2015, Tahi Inc. used cash to reacquire 400 of their own shares from the open market at a price of $6/share. Prepare Tahi’s journal entry (if necessary).  

4. On June 20, 2015, Tahi Inc. reissued 200 of the shares acquired in transaction 3 above. They sold the shares for $8/share. Prepare Tahi's journal entry (if necessary).  

5. On September 13, 2015, Tahi Inc. reissued 100 of the shares acquired in transaction 3 above. They sold the shares for $5/share. Prepare Tahi's journal entry (if necessary).  

6. Name one possible reason why might Tahi Inc. might have purchased its own stock in the example above.

Answer 1

Solution:

Journal Entries - Tahi Inc.
Event	Date	Particulars	Debit	Credit
1	1-Jan-15	No Entry
2	10-Jan-15	Cash Dr	$25,000.00
		To Common Stock		$5,000.00
		To Paid in capital in excess of par - common stock		$20,000.00
		(To record issue of shares)
3	26-Apr-15	Treasury Stock Dr	$2,400.00
		To Cash		$2,400.00
		(Being own 400 share reacquired at $6 each)
4	20-Jun-15	Cash Dr	$1,600.00
		To Treasury stock		$1,200.00
		To Additional paid in capital		$400.00
		(Being treasury share reissued)
5	13-Sep-15	Cash Dr	$500.00
		Additional paid in capital Dr	$100.00
		To Treasury stock		$600.00
		(Being treasury share reissued)

6. The possible reason for acquired own stock is that company want to earn short term profitability by dealing in own shares or company is having idle funds and want to reduce equity for the company.