Question

2. Nichols Inc. has the following transactions impacting its equity accounts during 2018.  The number of shares of $1 par value common stock authorized is 50,000,000 and the number of shares outstanding as of January 1, 2018 is 20,000,000.  The company also has 10,000 shares of 6% preferred stock with $100 par value authorized and outstanding at the beginning of the year.  The preferred stock may be converted into 10 shares of common stock and was originally issued for $110 per share.

Please record the following transactions:

                  Jan 1 – Nichols issues 2,000,000 shares of common stock for $11 per share.

                  May 1 – Repurchases 200,000 shares of common stock for $10 per share.

                  June 1 – Sold 50,000 shares of treasury stock for $12 per share.

                  October 1 – Nichols declares a two-for-one (2-for-1) stock split.

December 1 – Issued 20,000 shares for land.  The market price of the common stock is $13 per share.

1. Prepare the journal entries to record each of the transactions above.  
2. What is the weighted average shares outstanding for the year

Answer 1

Journal Entries
Date	Particulars	Debit	Credit
1-Jan	Bank A/c	22,000,000
	To Capital A/c		2,000,000
	To Securities Premium A/c		20,000,000
1-May	Capital A/c	200,000
	Securities Premium A/c	1,800,000
	To Bank A/c		2,000,000
1-Jun	Bank A/c	600,000
	To Capital A/c		600,000
1-Oct	Capital A/c	21,800,000
	To Capital A/c		21,800,000
1-Dec	Land A/c	260000
	To Capital A/c		10000
	To Securities Premium A/c		250000

2) Calculation of weighted avg number of shares
Date	Opening Balance	Shares issued	Shares purchased	Closing Balance	Weight in number of days	Weighted shares
1-Jan	20,000,000	2,000,000	0	22000000	120	7232876.712
1-May	22000000	0	200,000	21800000	31	1851506.849
1-Jun	21800000	50000	0	21850000	122	7303287.671
1-Oct	21850000	0	0	43700000	61	7303287.671
1-Dec	43700000	20000	0	43720000	31	3713205.479
			weighted average shares			27404164.38