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1) (Journal Entries!) World Marine obtained a charter from the state in January

ID: 2465448 • Letter: 1

Question

1) (Journal Entries!) World 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 $410,000 of net income and the following selected transactions occurred in the order given:

Prepare journal entries to record each transaction.

A) Record the issuance of 110,000 shares of common stock with a $5 par value for a price of $56 per share.

B) Record the purchase of 26,000 shares of previously issued common stock for a price of $51 per share.

C) Record the re-issuance of 10,500 shares of treasury stock previously purchased for a price of $51 per share and sold for $52 per share.

D) Record the re-issuance of 10,500 shares of treasury stock previously purchased for $51 per share and sold for $50 per share.

a. Issued 110,000 shares of the common stock at $56 cash per share. b. Reacquired 26,000 shares at $51 cash per share. c. Reissued 10,500 shares from treasury for $52 per share. d. Reissued 10,500 shares from treasury for $50 per share.

Explanation / Answer

Journal Entries

Description

Debit

Credit

Cash 110,000*56

6,160,000

To Common stock (110,000*5)

550,000

To Paid in capital in excess of par (110,000*51)

5,610,000

Treasury stock

1,326,000

To Cash (26,000*51)

1,326,000

Cash (10,500 *52)

546,000

To Treasury stock

(10,500 *51)

535,500

To Paid in excess of par – treasury stock

10,500

Cash (10,500*50)

525,000

Paid in capital in excess of par – Treasury stock

10,500

To Treasury stock

535,500

Description

Debit

Credit

Cash 110,000*56

6,160,000

To Common stock (110,000*5)

550,000

To Paid in capital in excess of par (110,000*51)

5,610,000

Treasury stock

1,326,000

To Cash (26,000*51)

1,326,000

Cash (10,500 *52)

546,000

To Treasury stock

(10,500 *51)

535,500

To Paid in excess of par – treasury stock

10,500

Cash (10,500*50)

525,000

Paid in capital in excess of par – Treasury stock

10,500

To Treasury stock

535,500