Question

Prepare the appropriate journal entries, if required, for the following items:

1) Sold 250,000 shares common stock at $5 cash each, $.01 par value

2) Bought back 1,000 shares of company common stock at $6 a share to use for management incentives etc.

3) Issued 100,000 shares of preferred stock for cash, $0.10 par value, for $30 a share.

4) Company declared a 2 for 1 stock split when there were 2,000,000 shares outstanding

Answer 1

Transaction	Account title and explanation	Debit	Credit
1	Cash (250,000x$5)	1,250,000
	Common stock (250,000x$0.01)		2,500
	Paid in capital in excess of par value-Common stock		1,247,500
2	Treasury stock (1,000x$6)	6,000
	Cash		6,000
3	Cash (100,000x$30)	3,000,000
	Preferred stock (100,000x$0.10)		10,000
	Paid in capital in excess of par value-Common stock		2,990,000
4	No entry is required