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Chapter 15: Question 5BE (page 811)

On February 1, 2017, Buffalo Corporation issued 3,000 shares of its \(5 par value common stock for land worth \)31,000. Prepare the February 1, 2017, journal entry.

Short Answer

Expert verified

Land should be debited by $31,000,and the common stock and paid-in capital should be credited by $15,000and $16,000,respectively.

Step by step solution

01

Meaning of Stock Issuance

The term stock issuance helps corporations raise funds to meet the business's financial need. A company usually does this to provide ownership in the company in exchange for finance

02

Preparing journal entries of buffalo corporation

Date

Particular

Folio

Debit USD

$

Credit USD

$

01-02-2017

Land A/c Dr.

31,000

To common stock A/c (3,000$5) Cr.

15,000

To paid-in capital in excess Cr.

Of par common stock A/c

16,000

(being share issued for land)

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Most popular questions from this chapter

Joe Dumars Company has outstanding 40,000 shares of \(5 par common stock, which had been issued at \)30 per share. Joe Dumars then entered into the following transactions.

  1. Purchased 5,000 treasury shares at \(45 per share.
  2. Resold 2,000 of the treasury shares at \)49 per share.
  3. Resold 500 of the treasury shares at $40 per share.

Instructions

Use the following code to indicate the effect each of the three transactions has on the financial statement categories listed in the table below, assuming Joe Dumars Company uses the cost method (I = Increase; D = Decrease; NE = No effect).

#

Asset

Liabilities

Stockholders’ Equity

Paid-in Capital

Retained

Earnings

Net Income

1

2

3

(Computation of Book Value per Share) Morgan Sondgeroth Inc. began operations in January 2015 and reported the following results for each of its 3 years of operations.

2015 \(260,000net loss 2016 \)40,000 net loss 2017 \(800,000 net income

At December 31, 2017, Morgan Sondgeroth Inc. capital accounts were as follows.

8% cumulative preferred stock, par value \)100;

authorized, issued, and outstanding 5,000 shares \(500,000

Common stock, par value \)1.00; authorized 1,000,000 shares;

issued and outstanding 750,000 shares \(750,000

Morgan Sondgeroth Inc. has never paid a cash or stock dividend. There has been no change in the capital accounts since Sondgeroth began operations. The state law permits dividends only from retained earnings.

Instructions

  1. Compute the book value of the common stock on December 31, 2017.
  2. Compute the book value of the common stock on December 31, 2017, assuming that the preferred stock has a liquidating value of \)106 per share.

How are restrictions of retained earnings reported?

(Cash Dividend and Liquidating Dividend) Lotoya Davis Corporation has 10 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 80 cents per share cash dividend to stockholders of record as of June 14, payable June 3

Instructions

  1. Prepare the journal entry for each of the dates above, assuming the dividend represents a distribution of earnings.
  2. How would the entry differ if the dividend were a liquidating dividend?

Discuss the propriety of showing:

  1. Treasury stock as an asset.
  2. “Gain” or “loss” on sale of treasury stock as additions to or deductions from income.
  3. Dividends received on treasury stock as income.
See all solutions

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