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Treasury Stock Pomona Corporation issued 60,000 shares of $3 par value common stock at $21 per...

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. Prepare the journal entry to record the sale of this treasury stock.

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Answer #1

a) Journal entry

No General journal Debit Credit
a Cash (60000*21) 1260000
Common Stock (60000*3) 180000
paid in capital in excess of par value-Common Stock 1080000
b Cash (9000*85) 765000
Preferred stock (9000*30) 270000
Paid in capital in excess of par value-Preferred 495000
c Treasury stock (2000*23) 46000
Cash 46000

b) Journal entry

date account and explanation Debit Credit
Cash (1500*30) 45000
Paid in capital from sale of treasury stock 10500
Treasury stock (1500*23) 34500

c) Journal entry

date account and explanation Debit Credit
Cash (500*20) 10000
Paid in capital from sale of treasury stock 1500
Treasury stock (500*23) 11500
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