Global Marine obtained a charter from the state in January that authorized 1,000

Question

Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $390,000 of net income and the following selected transactions occurred in the order given: a. Issued 120,000 shares of the common stock at $54 cash per share. b. Reacquired 24,000 shares at $49 cash per share. c. Reissued 9,500 shares from treasury for $50 per share. d. Reissued 9,500 shares from treasury for $48 per share. Required:

1. Indicate the account, amount, and direction of the effect on above transaction. (Enter any decreases to account balances with a minus sign.) assets, liabilities, stockholders equity

2. Prepare journal entries to record each transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

3. Prepare the stockholders’ equity section of the balance sheet at December 31. (Amounts to be deducted should be indicated by a minus sign.)

Explanation / Answer

Solution.

A ,

Cash account debited $6,480,000

Common stock account credited $600,000

Contributed capital account credited $5,880,000

B.

Treasury stock account debited $1,176,000

Cash account credited $1,176,000

C.

Cash account debited $475,000

Tresury stockaccount credited $465,500

Paid in capital account credited $9,500

d.

Cash account debited $456,000

Paid in capital account debited $9,500

Tresury stockaccount credited $465,500

3

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