Diane's Designs has two classes of stock authorized: 9%, $10 par value preferred and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 1 Issue 200,000 shares of common stock for $15 per share. February 6 Issue 900 shares of preferred stock for $13 per share. October 10 Purchase 12,000 shares of its own common stock for $14 per share. November 12 Resell 5,000 shares of treasury stock at $24 per share. 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:-

1. Cash Dr, $3,000,000 (200,000 * $15)

To Common stock $200,000 (200,000 * $1)

To Paid in capital in excess of par - Common stock $2,800,000

(Being issuance of common stock is recorded)

Here we debited the cash as it increased the current assets and we credited the common stock and paid in capital in excess of par - common stock as it also increased the stockholder equity

2. Cash Dr, 11,700 (900 * $13)

To Preferred stock $10,000 (900 * $10)

To Paid in capital in excess of par - Preferred stock $1,700

(Being issuance of the preferred stock is recorded)

Here we debited the cash as it increased the current assets and we credited the preferred stock and paid in capital in excess of par - Preferred stock as it also increased the stockholder equity

3. Treasury stock Dr, $168,000 (12,000 * $14)

To Cash $168,000

(Being cash paid is recorded)

Here we debited the treasury stock as it increased the treasury stock and we credited the cash as it reduced the current assets

4. Cash Dr, 120,000 (5,000 * $24)

To Treasury stock $70,000 (5,000 * $14)

To Paid in capital in excess of par - Treasury stock $50,000

(Being issuance of the treasury stock is recorded)

Here we debited the cash as it increased the current assets and we credited the treasury stock and paid in capital in excess of par - Treasury stock as it reduced the treasury stock