Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $330,000 of net income, declared no dividends, and the following selected transactions occurred in the order given: Issued 120,000 shares of the common stock at $48 cash per share. Reacquired 18,000 shares at $43 cash per share. Reissued 6,500 shares from treasury for $44 per share. Reissued 6,500 shares from treasury for $42 per share.

Question

Corinne Keller

Business

8 January, 00:54

Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $330,000 of net income, declared no dividends, and the following selected transactions occurred in the order given: Issued 120,000 shares of the common stock at $48 cash per share. Reacquired 18,000 shares at $43 cash per share. Reissued 6,500 shares from treasury for $44 per share. Reissued 6,500 shares from treasury for $42 per share.

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Lutz · Answer 1

cash 5,760,000 debit

common stock 600,000 credit

additional paid-in 5,160,000 credit

--to record issuance of shares---

Treasury Stock 774,000 debit

Cash 774,000 credit

--to purchase treasury stock--

Cash 286,000 debit

retained earnings 35,500 debit

Treasury Stock 318,500 credit

--to record reissuance of treasury stock--

Explanation:

We debit cash and credit the equity account, common stok at par value and additional paid in for hte difference

For the purchase of treasury stock is done at cost, we credit the cash disbursement.

For the third as we are selling for a lesser amount we are "lossing" but as the accouting do not allow to record gain/loss on the trade of own stock we use additional paid in when positive and we decrease retained earnings when negative.