Question

Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and$1 par value common. The following transactions affect stockholders' equity during 2018, its first year of operations:

January 2Issues 100,000 shares of common stock for $35 per share.February 6Issues 3,000 shares of 8% preferred stock for $11 per share.September 10Repurchases 11,000 shares of its own common stock for $40 per share.December 15Reissues 5,500 shares of treasury stock at $45 per share.\begin{matrix} \text{January 2} & \text{Issues $100,000$ shares of common stock for $\$ 35$ per share.}\\ \text{February 6} & \text{Issues $3,000$ shares of 8$\\\%$ preferred stock for $\$ 11$ per share.}\\ \text{September 10} & \text{Repurchases $11,000$ shares of its own common stock for $\$ 40$ per share.}\\ \text{December 15} & \text{Reissues $5,500$ shares of treasury stock at $\$ 45$ per share.}\\ \end{matrix}

Record each of these transactions.

Solution

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Company FF issued two classes of shares, 8%8\% preferred stock and par value is $10\$10.

Company also issue common stocks and par value is $1\$1.

In the year 2018., various transactions are executed by the company.

It is required to record the transactions.

Jornal entry to record the issue of 100.000100. 000 common stock at $35\$ 35, is given:

DateDescriptionPostRef.Debit($)Credit($)2.January2018. Cash (100.000$35)3.500.000Common Stock (100.00$1)100.000Additional Paid-in-capital3.400.000(record issue of common shares above par value) \begin{array}{|c| l |c|r|r |} \hline Date & Description & Post Ref. & Debit (\$)& Credit (\$)\\ \hline 2. \quad January \quad 2018. &\text{ Cash $(100.000 \cdot \$35)$} & & 3.500.000 & \\ & \text{Common Stock $ (100.00\cdot \$1)$}& & & 100.000 \\ & \text{Additional Paid-in-capital}& & & 3.400.000 \\ & \text{(record issue of common shares above par value) }& & & \\ \hline \end{array}

Cash account is debited because cash is received by the company and what comes in is always debited. Common stock is credited as it increases the liability of the company. Additional paid -in capital is credited as the shares are issued at a price higher than the par value.

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Bearcat Construction begins operations in March and has the following transactions.

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