Q26E - Horngren'S Financial And Managerial Accounting

Question

Journalizing issuance of stock and treasury stock transactions

Stock transactions for Careful Driving School, Inc. follow:

Mar. 4 Issued 27,000 shares of \(1 par value common stock at \)10 per share.

May 22 Purchased 1,300 shares of treasury stock—common at \(13 per share.

Sep. 22 Sold 500 shares of treasury stock—common at \)23 per share.

Oct. 14 Sold 800 shares of treasury stock—common at $9 per share.

Step-by-Step Solution

Answer

Cash is debited with $270,000; Common stock$27,000 and Paid- in capital in excess of par$243,000 is credited.

Treasury stockis debited; Cashis credited with $16,900

Cash is debited $11,500; Treasury stock$6,500 and Paid- in capital in excess of par$5,000 is credited.

Cash$7,200 and Paid- in capital in excess of par$3,200 is debited; Treasury stock$10,400 is credited.

Step 1: Basic Introduction

Workings:

Common stock (27,000* $1)

Paid- in capital in excess of par ($270,000- $27,000)

Treasury stock (1,300* $13)

Treasury stock (500* $13)

Paid- in capital in excess of par ($500* $10)

Paid- in capital in excess of par ($800* $4)

Treasury stock (800* $9)

 

Step 2: Journals

Date	Transaction	Debit	Credit
Mar.4	Cash	$270,000
	Common stock		$27,000
	Paid- in capital in excess of par		$243,000
	To record issue of common stock
May 22	Treasury stock	$16,900
	Cash		$16,900
	To record purchase of treasury stock
Sep 22	Cash	$11,500
	Treasury stock		$6,500
	Paid- in capital in excess of par		$5,000
	To record sell of treasury stock
Oct 14	Cash	$7,200
	Paid- in capital in excess of par	$3,200
	Treasury stock		$10,400
	To record sell of treasury stock