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23. Poquito Corporation had both the following transactions occur on the same day:
1. Issued 30,000 shares of its $5 par value common stock for $360,000 cash.
2. Issued 10,000 shares of its $5 par value common stock in exchange for land and a building. The
building is estimated to have a market value of $90,000.
Prepare the entries in journal form to record the above transactions. Omit explanations, but show
computations.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
ANS:
24. Stonehurst Corporation is authorized to issue 100,000 shares of $5 stated value common stock and
2,000 shares of $100 par value, 6 percent preferred stock. Prepare entries in journal form without
explanations to record the following transactions:
July
15
Issued 1,000 shares of common stock to an attorney for a bill of $7,000 in
connection with the organization of the corporation.
25
Issued 2,000 shares of preferred stock for cash of $120 per share.
27
Issued 10,000 shares of common stock in exchange for land for a plant site
valued at $75,000.
Aug.
1
Issued 5,000 shares of common stock for $35,000 in cash.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
25. Brandt Corporation is authorized to issue 100,000 shares of $5 stated value common stock and 2,000
shares of $100 par value, 8 percent preferred stock. Prepare entries in journal form without
explanations to record the following transactions:
Apr.
15
Issued 1,000 shares of common stock to an attorney for a bill of $9,000 in
connection with the organization of the corporation.
25
Issued 1,000 shares of preferred stock for cash of $115 per share.
27
Issued 8,000 shares of common stock in exchange for land for a plant site
valued at $50,000.
May
1
Issued 15,000 shares of common stock for $90,000 in cash.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
26. When stock is issued for noncash assets or services, how does one place a valuation (dollar amount) on
the transaction?
27. If there is no change in the number of shares authorized and issued from one year to the next, but there
is a change in the number of shares outstanding on those same dates, how would you explain that
change?
28. In its 2010 annual report, Gamma Company indicated that the number of common shares held in the
treasury decreased from 45,546,171 in 2009 to 3,397,381 in 2010. The following also was reported:
By Board authorization, effective December 31, 2010 the Company canceled 50 million shares of
common stock held in treasury. As a result of the cancellation, common stock decreased by $125
million, capital in excess of par value of stock decreased by $228 million, and retained earnings
decreased by $3,119 million.
The shares canceled or retired represent almost 25 percent of the shares of common stock issued by
Gamma. Explain the accounting for the treasury shares by Gamma. Did the company buy any treasury
shares during the year? Prepare the entry in journal form that was made to record the cancellation or
retirement of the treasury shares. At what average price were the treasury shares purchased, and at
what average price were they originally issued? What do you think was management's reason for
purchasing the treasury shares? (Omit explanations.)
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
29. Issuing common and preferred stock generally has been popular among corporations. However, some
companies have bought back their common stock. For example, because its stock had declined under
the uncertainty of possible health care reforms, Bristol-Myers Squibb bought 25 million of its own
shares. Other companies have been awash in cash because of the decline in interest rates, layoffs to cut
costs, and decreased need to make new investments. Quaker Oats purchased 4.8 million of its own
shares for $323 million and plans to purchase 5 million more. The Quaker Oats treasurer was quoted
as saying, “We spend on new products, we make acquisitions, we raise the dividend, and we still can't
soak up the cash.” Sun Microsystems cut its outstanding shares by 9 percent with an aggressive
buyback program, and PepsiCo purchased 50 million shares at a cost of $1.8 billion. For what reasons
would a company buy back its own shares?
ANS:
30. Prepare the entries in journal form necessary to record the following stock transactions of Fitzgerald
Corporation. These transactions represent all treasury stock transactions entered into by the company.
(Omit explanations.)
June
1
Purchased 2,000 shares of its own $30 par value common stock for $70 per
share, the current market price.
10
Sold 500 shares of treasury stock purchased on June 1 for $80 per share
20
Sold 700 shares of treasury stock purchased on June 1 for $58 per share.
30
Retired the remaining shares purchased on June 1. The original issue price was
$42 per share.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
ANS:
31. On its December 31, 2009, balance sheet, Montrose Corporation reported its stockholders' equity as
follows:
Common stock—$5 par value, 100,000 shares authorized,
50,000 shares issued and outstanding
$250,000
Additional paid-in capital
125,000
Retained earnings
400,000
Total stockholders' equity
$775,000
During 2010, the following transactions occurred:
Reacquired 2,500 shares at $7 per share.
Sold 1,200 shares of treasury stock at $8 per share.
Sold 500 shares of treasury stock at $6 per share.
Net income for 2010 amounted to $80,000.
a. Prepare the entries in journal form for the three transactions involving treasury stock. (Omit
explanations.)
b. Compute the amount of total contributed capital to be reported on the December 31, 2010, balance
sheet.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
32. Prepare entries in journal form without explanations to record the following transactions involving
Dailey Corporation's $5 par value common stock:
Apr.
1
Purchased 500 shares of its own common stock for $12, the current market
price. This is the first transaction involving its own stock engaged in by the
company.
May
1
Sold 100 of the shares purchased on April 1 for $15.
June
1
Retired 100 of the shares purchased on April 1. The original issue price was $8.
July
1
Sold 200 of the shares purchased on April 1 for $10.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
33. The following amounts were reported by Ebert Corporation on December 31, 2009:
Common stock—$5 par value
$150,000
Additional paid-in capital
120,000
Treasury stock (8,000 shares at cost)
60,000
On January 3, 2010, 5,000 shares of treasury stock were sold. After the sale of the treasury shares, total
stockholders' equity amounted to $277,500. No stockholders' equity transactions other than the sale of
the treasury stock occurred between December 31, 2009, and January 3, 2010. From the information
given, compute the selling price per share of the treasury stock.
34. On its December 31, 2009, balance sheet, Houston Corporation reported its stockholders' equity as
follows:
Common stock—$5 par value, 100,000 shares authorized,
50,000 shares issued and outstanding
$250,000
Additional paid-in capital
125,000
Retained earnings
400,000
Total stockholders' equity
$775,000
During 2010, the following transactions occurred:
Reacquired 2,500 shares at $7 per share.
Sold 1,200 shares of treasury stock at $8 per share.
Sold 500 shares of treasury stock at $6 per share.
Net income for 2010 amounted to $80,000. No dividends were declared.
Prepare the stockholders' equity section of the balance sheet as it should appear on December 31,
2010.
Houston Corporation
Partial Balance Sheet
December 31, 2010
