Problem 1 (20 Points) Horner Corporation is authorized to issue 1,000,000 shares

Question

Problem 1 (20 Points) Horner Corporation is authorized to issue 1,000,000 shares of $1 par value common stock. During 2011, its first year of operation, the company has the following stock transactions. Jan 1 Issued 600,000 shares of stock at $8 per share Jan 30 Attorneys for the company accepted 600 shares of common stock as payment for legal services invoiced at $4,000. July 2 Issued 100,000 shares of stock for land. The land had an asking price of $900,000. The stock is currently selling on the national exchange at $12 per share. Sept 5 Purchased 5,000 shares of common stock for the treasury at $10 per share. Dec 6 Sold 1,000 shares of the treasury stock at $12 per share (Hint: TS/Pic). Dec 25 Sold 4,000 shares of the treasury stock at $8 per share (Hint: TS/Pic and RE). Instructions: Journalize the transactions for Horner Corporation.

Explanation / Answer

Solution: Date Particulars Debit Credit Jan 1 Cash 4,800,000 Common Stock 600,000 Paid-In Capital in Excess of Par- Common Stock 4,200,000 Jan 30 Organizational Expense 4,000 Common Stock 600 Paid-In Capital in Excess of Par- Common Stock 3,400 July 2 Land 1,200,000 Common Stock 100,000 Paid-In Capital in Excess of Par- Common Stock 1,100,000 Sept 5 Treasury Stock 50,000 Cash 50,000 Dec 6 Cash 12,000 Treasury Stock 10,000 Paid-In Capital from Treasury Stock 2,000 Dec 25 Cash 32,000 Retained Earnings 6,000 Paid-In Capital from Treasury Stock 2,000 Treasury Stock 40,000 Working Notes: Date Particulars Debit Credit Jan 1 Cash 4,800,000 [600,000 x $8] Common Stock 600,000 [600,000 x $1 ] Paid-In Capital in Excess of Par- Common Stock 4,200,000 [600,000 x ($8 - $1)] Jan 30 Organizational Expense 4,000 Common Stock 600 [600 x $1 ] 3,400 Paid-In Capital in Excess of Par- Common Stock [$4,000 - $600 = $3,400] July 2 Land 1,200,000 Common Stock 100,000 [100,000 x $1 ] Paid-In Capital in Excess of Par- Common Stock 1,100,000 [100,000 x ($12 -$1) ] Sept 5 Treasury Stock 50,000 [5,000 shares x $ 10 ] Cash 50,000 Dec 6 Cash 12,000 [1,000 shares x $ 12 ] Treasury Stock 10,000 [1,000 shares x $ 10 ] Paid-In Capital from Treasury Stock 2,000 [1,000 shares x ($12 - $10) ] Dec 25 Cash 32,000 [4,000 shares x $ 8 ] Retained Earnings 6,000 [40,000 - 32,000 -2,000 = $6,000] balancing figure. Paid-In Capital from Treasury Stock 2,000 [First used if treasury stock issued at below purchased price] Treasury Stock 40,000 [4,000 shares x $ 10 ] Please feel free to ask if anything about above solution in comment section of the question.

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