Blossom Corporation is authorized to issue 49,000 shares of $5 par value common stock. During 2017, Blossom took part in the following selected transactions:

1. Issued 4,500 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,900.

2. Issued 1,100 shares of stock for land appraised at $49,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.

3. Purchased 470 shares of treasury stock at $41 per share. The treasury shares purchased were issued in 2013 at $38 per share.

(a) Prepare the journal entry to record item 1.

(b) Prepare the journal entry to record item 2.

(c) Prepare the journal entry to record item 3 using the cost method.

See explanation section

Explanation:

Requirement A

Debit Cash $194,600

Credit Common stock - Par value $ 22,500

Credit Common stock - Additional paid-in-capital $172,100

Calculation:

Cash: 4,500 shares * $45 = $202,500

As the company's par value is $5,

Common stock - Par value: 4,500 shares * $5 = $22,500

As the market value of the stock is $45, the additional stock value = $45 - $5 = $40. Moreover, the company has issuance cost of $7,900

Additional common stock apart from par value minus the issuance cost = ($4,500 shares * $40) - $7,900 = $180,000 - $7,900 = $172,100.

The company issue common stock with a market value of $45 and issuance cost of $7,900 in exchange of cash.

Requirement B

Debit Land $50,600

Credit Common stock - Par value $ 5,500

Credit Common stock - Additional paid-in-capital $45,100

Calculation:

Land: 1,100 shares * $46 = $50,600

As the company's par value is $5,

Common stock - Par value: 1,100 shares * $5 = $5,500

As the market value of the stock is $46, the additional stock value = $46 - $5 = $41.

Additional common stock apart from par value = ($1,100 shares * $41) = $45,100.

Although the land is appraised for $49,000, due to the increased market price stock, it is valued more.

The company issue common stock with a market value of $46 in exchange for land.

Requirement C

Debit Treasury Stock $19,270

Credit Cash $19,270

Purchasing share from the stock market is known as treasury stock.

Calculation: Treasury stock = 470 shares * $41 = $19,270

Debit Cash $17,860

Credit Common Stock - par value $2,350

Credit Common stock - Additional paid-in-capital $15,510

Calculation:

As the company's par value is $5,

Common stock - Par value: 470 shares * $5 = $2,350

Additional common stock apart from par value = $470 shares * ($38 - $5) = $15,510.

The company issue common stock with a market value of $38 after purchasing those treasury stock at $41 per share.