Question

Question #3 Record the following transactions in journal entry form (14 marks) 1. Company issues 20,000 shares of $2 par value common shares at a market price of $44 per share. (3 marks) 2. Assume that 4,000 common shares previously issued for $44 are later repurchased for $40 (2 marks) 3. Assume that these 4,000 shares are then subsequently resold for $43 per share (3 marks) 4. (6 marks) Instead of reselling the treasury shares, a company may retire or cancel them. Assume the company retires 4,000 treasury shares (recall that the $2 par value shares were originally issued for $44 per share and later repurchased for $40 per share).

Answer 1

Question #3.

Event	General Journal	Debit	Credit
1	Cash [20000*44]	$ 880,000
	Common Stock [20000*2]		$    40,000
	Paid in capital in excess of par [20000*42]		$ 840,000
	( To record issue of common shares)
2	Treasury Stock [4000*40]	$ 160,000
	Cash		$ 160,000
	( To record treasury stock)
3	Cash [4000*43]	$ 172,000
	Treasury stock		$ 160,000
	Paid in capital from treasury stock		$    12,000
	( To record Treasury stock resold)
4	Common stock [4000*2]	$     8,000
	Paid in capital in excess of par [4000*42]	$ 168,000
	Treasury stock		$ 160,000
	Retained earnings		$    16,000
	( To record retirement of treasury stock)