Question

Worldwide Company obtained a charter from the state in January that authorized 200,000 shares of common stock, $10 par value. During the first year, the company earned $38,300 and the following selected transactions occurred in the order given:

a.	Issued 61,000 shares of the common stock at $11 cash per share.
	b. Reacquired 2,100 shares at $14 cash per share from stockholders; the shares are now held in treasury.
	c. Reissued 1,050 of the shares in transaction (b) two months later at $17 cash per share. 1) Indicating the account, amount, and direction of the effect on above transaction. (Enter any decreases to account balances with a minus sign.) Assets----Liabilities----Stockholders equity 2) Prepare journal entries to record each transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 3) Prepare the stockholders’ equity section of the balance sheet at December 31. (Amounts to be deducted should be indicated by a minus sign.) TIP: Because this is the first year of operations, Retained Earnings has a zero balance at the beginning of the year.

Answer 1

• All working forms part of the answer
• Requirement 1

Transaction	ASSETS		LIABILITIES		STOCKHOLDERS' EQUITY
a. Common Stock Issued	Cash [61000 x $11]	671000			Common Stock [61000 x $10]	610000
					Additional paid In Capital - Common Stock [61000 x $1]	61000
b. Shares re acquired	Cash [1050 x $14]	$         (29,400.00)			Treasury Stock	$        (29,400.00)
c. Treasury stock re-issued	Cash [1050 x $17]	$           17,850.00			Treasury Stock [1050 shares x $14]	$          14,700.00
					Additional Paid in capital - Treasury Stock [1050 shares x $3]	$             3,150.00
	TOTAL	$        6,59,450.00	TOTAL	$                         -	TOTAL	$       6,59,450.00

• Requirement 2: Journal Entries – amounts based on above requirement 1 (for amount calculation below, please see requirement 1)

Date	General Journal	Debit	Credit
a. Common Stock Issued	Cash	$        6,71,000.00
	Common Stock		$       6,10,000.00
	Additional paid In capital - Common Stock		$           61,000.00
	(common stock issued)
b. Shares re acquired	Treasury Stock	$           29,400.00
	Cash		$           29,400.00
	(shares re acquired)
c. Treasury stock re-issued	Cash	$           17,850.00
	Treasury Stock		$           14,700.00
	Additional Paid In Capital - Treasury Stock		$             3,150.00
	(treasury shares re issued)

• Requirement 3: Stockholder’s Equity Section of Balance Sheet

Common Stock at $10 par	$       6,10,000.00
Additional paid In capital - Common Stock	$          61,000.00
Additional Paid In Capital - Treasury Stock	$             3,150.00
Retained earnings	$          38,300.00
Total	$       7,12,450.00
Less: Treasury Stock [29400 - 14700]	$          14,700.00
Total Stockholder's Equity	$       6,97,750.00