Question

4.) During the first year of operations, New York Corporation had the following transactions:

Jan. 1 — Issued 50,000 shares of $1 par value common stock at $20 per share.

May 24 — Reacquired 5,000 shares of common stock sold on Jan. 1 for $23 per    share.

Aug. 31 — Sold 500 shares of its treasury stock purchased on May 24 for $25 per share.

Oct. 18 — The board of directors declared and distributed a 10% common stock. The market price of the common stock was $26 per share at the time of the declaration.

Nov. 24 — The board of directors declared a cash dividend of $0.50 per share payable to stockholders on December 8.

Dec. 8 — Paid the cash dividends declared on November 24.

Required:

Prepare the journal entries for the above transactions. Omit explanations.

Answer 1

Jan 1      Bank a/c                                                               dr            $1,000,000

                                Common Stock a/c                                                           $50,000

                                Premium a/c                                                                     $950,000

May 24 Treasury stock a/c                                            dr            $115,000

                                Bank a/c                                                                               $115,000

Aug 31   Bank a/c                                                               dr            $12,500

                                Treasury stock a/c                                                            $11,500

                                Profit a/c                                                                          $1,000

Oct 18   Bank a/c                                                               dr            $130,000

                                Common stock a/c                                                           $5,000

                                Premium a/c                                                                    $125,000

Nov 24 Dividend Payable a/c                                      dr            $27,500

                                Stockholders a/c                                                               $25,250

                                Dividend on treasury stock a/c                                            $2,250

Dec 8     Stockholders a/c                                               dr            $25,250

                                Bank a/c                                                                               $25,250