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Intermediate Accounting (Kieso)
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Short Answer

Lindsey Hunter Corporation is authorized to issue 50,000 shares of $5 par value common stock. During 2017, Lindsey Hunter took part in the following selected transactions.

  1. Issued 5,000 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,000.
  2. Issued 1,000 shares of stock for land appraised at $50,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.
  3. Purchased 500 shares of treasury stock at $43 per share. The treasury shares purchased were issued in 2013 at $40 per share.

Instructions

  1. Prepare the journal entry to record item 1.
  2. Prepare the journal entry to record item 2.
  3. Prepare the journal entry to record item 3 using the cost method.

The total debit and credit side of the journal is $285,500.

See the step by step solution

Step by Step Solution

Meaning of Treasury Stock

Treasury stock is previously existing stock that has been repurchased and held by the issuing company. Treasury inventory reduces the total shareholder's equity on a company's balance sheet and is thus a counter-equity account.

Recording of Journal Entries

S.no.

Particular

Debit $

Credit $

(1)

Cash A/c.

218,000

Common Stock A/c.

25,000

Paid-in Capital in excess of par common

Stock A/c.

193,000

To record the issue of stock

(2)

Land A/c.

46,000

Common Stock A/c.

5,000

Paid-in Capital in excess of par common

Stock A/c.

41,000

To record the issue of stock

(3)

Treasury Stock A/c.

21,500

Cash A/c.

21,500

To record transfer of treasury stock.

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