Ardner Corporation is authorized to issue 25,000 shares of $10 par value common

Question

Ardner Corporation is authorized to issue 25,000 shares of $10 par value common stock. During 2017, Ardner’s first year of operations, the company has the following stock transactions:

On the form provided on the following page, journalize the transactions for Ardner Corporation.

Jan. 15      Issued 20,000 shares of stock at $15 per share.

July 5       Purchased 1,000 shares of its own $10 par value common stock for $25

                 per share.

July 10      Declared a dividend of $.50 per share. The dividend is to be paid on August 1

                 to all shareholders of record on July 26.

July 26     Date of record for cash dividend.

Aug. 1      Paid the cash dividend.

Aug. 17    Sold 500 shares of treasury stock purchased for $30 per share.

Oct. 28     Sold the remaining shares of treasury stock purchased for $10 per share.

Nov. 15    Issued 2,000 share in exchange for a vehicle. At that time the stock was selling for $18

                 per share and the market value of the vehicle was $41,000.

Date

Account Titles

Debit

Credit

Date

Account Titles

Debit

Credit

Explanation / Answer

Solution:

Journal Entries

Date

Account Titles

Debit

Credit

Jan.15

Cash (20,000 Shares x 15)

$300,000

Common Stock (20,000 Shares x Par $10)

$200,000

Paid in capital in excess of par - common stock (20,000 Shares x 5)

$100,000

July.5

Treasury Stock (1,000 shares x $25)

$25,000

Cash

$25,000

July.10

Retained Earnings (20,000 - 1000) Shares x 0.50)

$9,500

Cash Dividend Payable

$9,500

July.26

No entry on record date

Aug.1

Cash Dividend Payable

$9,500

Cash

$9,500

Aug.17

Cash (500 Shares x $30)

$15,000

Treasury Stock (500 Shares x Cost $25)

$12,500

   Paid in Capital from Treasury Stock (500 Shares x 5)

$2,500

Oct.28

Cash (500 Shares x $10)

$5,000

Retained Earnings (500 Shares x 15)

$7,500

Treasury Stock (500 Shares x Cost $25)

$12,500

Nov.15

Vechicle

$41,000

Common Stock (2000 Shares x Par $10)

$20,000

Paid in capital in excess of par - common stock (bal Fig)

$21,000

Note – Treasury Stock Treatment

Treasury Stock

Treasury Stock is the shares that a company repurchased from the market or from its shareholders.

Under cost method, the cost of shares purchased is debited to Treasury Stock Account.

On sale of treasury stock

(i) If selling price is higher than cost

- the relevant COST of treasury stock share is credited to Treasury Stock Account and Cash is debited with the total selling price and the difference is credited to Paid In Capital from treasury stock.

(ii) If selling price is lower than cost

Debit: Cash (with the selling price)

Debit: Retained Earnings (Difference between selling price and cost)

Credit: Treasury Stock (with the cost of share)

Date

Account Titles

Debit

Credit

Jan.15

Cash (20,000 Shares x 15)

$300,000

Common Stock (20,000 Shares x Par $10)

$200,000

Paid in capital in excess of par - common stock (20,000 Shares x 5)

$100,000

July.5

Treasury Stock (1,000 shares x $25)

$25,000

Cash

$25,000

July.10

Retained Earnings (20,000 - 1000) Shares x 0.50)

$9,500

Cash Dividend Payable

$9,500

July.26

No entry on record date

Aug.1

Cash Dividend Payable

$9,500

Cash

$9,500

Aug.17

Cash (500 Shares x $30)

$15,000

Treasury Stock (500 Shares x Cost $25)

$12,500

   Paid in Capital from Treasury Stock (500 Shares x 5)

$2,500

Oct.28

Cash (500 Shares x $10)

$5,000

Retained Earnings (500 Shares x 15)

$7,500

Treasury Stock (500 Shares x Cost $25)

$12,500

Nov.15

Vechicle

$41,000

Common Stock (2000 Shares x Par $10)

$20,000

Paid in capital in excess of par - common stock (bal Fig)

$21,000

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