A company has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during Year 1, its first year of operations: January 2 Issues 100,000 shares of common stock for $26 per share. February 6 Issues 2,100 shares of 9% preferred stock for $11 per share. September 10 Purchases 11,000 shares of its own common stock for $31 per share. December 15 Resells 5,500 shares of treasury stock at $36 per share. Required: Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer and Explanation:

The journal entries are shown below:

On Jan 2

Cash (100,000 shares * $26) $2,600,000

To Common Stock (100,000 shares * $1) $100,000

To Paid in capital in excess of par value - Common Stock $2,500,000

On Feb 6

Cash (2,100 shares * $11) $23,100

To Preferred stock (2,100 shares * $10) $21,000

To Paid in capital in excess of par value-preferred stock $2,100

On Sep 10

Treasury Stock (11,000 * $31) $341,000

To Cash $341,000

(Being the purchase of own common stock is recorded)

On Dec 15

Cash (5,500 shares * $36) $198,000

To Treasury Stock (5,500 shares * $31) $170,500

To Paid in capital from sale of treasury stock $27,500

(Being the resells of treasury stock is recorded)