Question

Treasury Stock 

Pomona Corporation issued 60,000 shares of $3 par value common stock at $21 per share and 9,000 shares of $30 par value, ten percent preferred stock at $85 per share. Later, the company purchased 2,000 shares of its own common stock at $23 per share.

 a. Prepare the journal entries to record the share issuances and the purchase of the common shares.

 b. Assume that Pomona sold 1,500 shares of the treasury stock at $30 per share. Prepare the general journal entry to record the sale of this treasury stock.

 c. Assume that Pomona sold the remaining 500 shares of treasury stock at $20 per share.

Answer 1

Ref.	Description	Debit	Credit
a.	Cash                                                                                            [60,000 shares x $21]	$1,260,000
	Common Stock                                                                         [60,000 shares x $3]		$180,000
	Paid-in capital in excess of par value - Common stock            [60,000 shares x ($21 - $3)]		$1,080,000
	(Issued shares of common stock)
	Cash                                                                                            [9,000 shares x $85]	$765,000
	10% Preferred stock                                                                 [9,000 shares x $30]		$270,000
	Paid-in capital in excess of par value - Preferred stock           [9,000 shares x ($85 - $30)]		$495,000
	(Issued shares of preferred stock)
	Treasury stock	$46,000
	Cash                                [2,000 shares x $23]		$46,000
	(Acquired shares of common stock)
b.	Cash                                                         [1,500 shares x $30]	$45,000
	Treasury stock                                      [Cost = 1,500 shares x $23]		$34,500
	Paid in capital from treasury stock       [Gain = 1,500 shares x ($30 - $23)]		$10,500
	(Sold shares of treasury stock)
c.	Cash                                                         [500 shares x $20]	$10,000
	Paid in capital from treasury stock           [Loss = 500 shares x ($23 - $20)]	$1,500
	Treasury stock                                        [Cost = 500 shares x $23]		$11,500
	(Sold shares of treasury stock)