Question

Lexin Corp. uses the par value method to account for its treasury stock transactions. The company is considering changing to the cost method, and would like to evaluate the differences between the two methods and the impact that the change would have on the equity section of the company’s balance sheet.

The following transactions occurred during the year:

•	At the beginning of the year, 25,000 shares of $5 par common stock were issued at $8 per share.
•	Several months later, Lexin repurchased 1,500 shares at $12 per share.
•	Before the end of the fiscal year, the company re-sold 500 shares at $10 per share and then another 500 shares at $15 per share.

For the situations below, record the appropriate journal entries.

To prepare each required journal entry:

• Click on a cell in the Account Name column and select the appropriate account. An account may be used once, more than once, or not at all for a journal entry.
• Enter the corresponding debit or credit amount in the associated column.
• All amounts will be automatically rounded to the nearest dollar.
• Not all rows in the table might be needed to complete each journal entry.

1. Provide the journal entries for the transactions above under the par value method. Note: Make separate journal entries for each of the two re-sell transactions.

Answer 1

S No	General Journal	Debit	Credit
1	Cash	200000
	Common stock		125000
	Additional Paid in capital in excess of par - common stock [25000*3]		75000
	[Issue of stock]
2	Treasury Stock	7500
	Additional Paid in capital in excess of par - common stock [1500*3]	4500
	Cash		18000
	Additional Paid-in Capital from Treasury Stock 1500*4]		6000
	[Purchase of treasury stock]
3	Cash	5000
	Treasury stock [500*5]		2500
	Additional Paid-in Capital on Common Stock		2500
	[Re issue of 500 shares at $10 per share]
4	Cash	7500
	Treasury stock [500*5]		2500
	Additional Paid-in Capital on Common Stock		5000
	[Re issue of 500 shares at $15 per share]