Lindsey Hunter Corporation is authorized to issue 50,000 shares of \(5 par value common stock. During 2017, Lindsey Hunter took part in the following selected transactions.

1. Issued 5,000 shares of stock at \)45 per share, less costs related to the issuance of the stock totaling \(7,000.
2. Issued 1,000 shares of stock for land appraised at \)50,000. The stock was actively traded on a national stock exchange at approximately \(46 per share on the date of issuance.
3. Purchased 500 shares of treasury stock at \)43 per share. The treasury shares purchased were issued in 2013 at $40 per share.

Instructions

1. Prepare the journal entry to record item 1.
2. Prepare the journal entry to record item 2.
3. Prepare the journal entry to record item 3 using the cost method.

Step by step solution

01

Meaning of Treasury Stock

Treasury stock is previously existing stock that has been repurchased and held by the issuing company. Treasury inventory reduces the total shareholder's equity on a company's balance sheet and is thus a counter-equity account.

02

Recording of Journal Entries

S.no.	Particular	Debit $	Credit $
(1)	Cash A/c.	218,000
	Common Stock A/c.		25,000
	Paid-in Capital in excess of par common Stock A/c.		193,000
	To record the issue of stock
(2)	Land A/c.	46,000
	Common Stock A/c.		5,000
	Paid-in Capital in excess of par common Stock A/c.		41,000
	To record the issue of stock
(3)	Treasury Stock A/c.	21,500
	Cash A/c.		21,500
	To record transfer of treasury stock.

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!