Question

Inland Corporation issued 50,000 common shares with a par value of $4 to $25 per share and 9,000 shares with a par value of $36, ten percent preferred stock at $102 per share. Later, the company purchased 2,000 shares of its common stock for $28 per share.

a. Prepare journal entries to record stock issues and common stock purchases.
b. Suppose Inland sold 1,500 treasury shares for $34 per share. Prepare the general journal entry to record the sale of these treasury shares.
C. Suppose that Inland sold the remaining 500 treasury shares for $24 per share. Prepare the journal entry to record the sale of these treasury shares.

Answer 1

a. Journal entries to record stock issues and common stock purchases:

 

1) Issuance of common stock:

Cash $1,250,000 (50,000 x $25)

Common Stock (50,000 x $4) $200,000

Paid-in Capital in Excess of Par $1,050,000

 

2) Issuance of preferred stock:

Cash $918,000 (9,000 x $102)

Preferred Stock (9,000 x $36) $324,000

Paid-in Capital in Excess of Par $594,000

 

3) Purchase of common stock:

Treasury Stock $56,000 (2,000 x $28)

Cash $56,000

 

b. General journal entry to record the sale of 1,500 treasury shares:

 

Cash $51,000 (1,500 x $34)

Treasury Stock $42,000 (1,500 x $28)

Paid-in Capital from Treasury $9,000 [(1,500 x $34) - (1,500 x $28)]

 

c. Journal entry to record the sale of the remaining 500 treasury shares:

 

Cash $12,000 (500 x $24)

Treasury Stock $14,000 (500 x $28)

Paid-in Capital from Treasury $2,000 [(500 x $24) - (500 x $28)]