In 2014, Mordica Co. issued 300,000 of its 500,000 authorized shares of $10 par

Question

In 2014, Mordica Co. issued 300,000 of its 500,000 authorized shares of $10 par value common stock at $35 per share. In January, 2015, Mordica repurchased 25,000 shares at $30 per share. Assume these are the only stock transactions the company has ever had.

Instructions

(a) Prepare the journal entry to record the purchase of treasury stock by the cost method.

(b) 9,000 shares of treasury stock are reissued at $33 per share. Prepare the journal entry to record the reissuance by the cost method.

(c)  9,000 shares of treasury stock are reissued at $27 per share. Prepare the journal entry to record the reissuance by the cost method.

Explanation / Answer

(a)

Journal entry to record the purchase of treasury stock by cost method is as follows:

(b)

Journal entry to record the reissuance of treasury stock by cost method is as follows:

(c)

Journal entry to record the reissuance of treasury stock by cost method is as follows:

Date Particulars L.F Amount ($) Amount ($) Jan-15 Treasury Stock 750,000    Cash 750,000 (For Treasury stock purchased by cost method)

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