Chapter 15, Problem 6E

To determine

Stock issuance and repurchase: Common stock represents equity ownership in a corporation. Common stockholders bear a higher amount of risk of loss and are also entitled to higher benefits in the company’s profits and assets. Common stock can be issued at par or at a premium or discount.

Common shares can be issued not only for cash but also in exchange of another asset or as a payment for an expense.

No par stock is recorded in the accounts at the issue price. However, some states require shares to be issued at a particular value. This value is called stated value. A company cannot issue shares below the stated value.

Sometimes companies buy back or require their own shares. These stocks are either retired or held for reissue. Shares held for reissue are called treasury stock. Treasury stocks are not held as assets but are same as unissued capital. Treasury stocks can be reissued at different rates at different points of time. The sale can be at cost or above or below the cost.

To prepare: To prepare the journal entry issue of common stock and repurchase.

Given information: Shares authorized: 50,000.

Par value: $5.

1st issue: 5,000 shares at $45 per share.

Expenses: $7,000.

2nd issue:1,000 shares in exchange of land.

Land appraised: $50,000.

Traded price: $46.

Treasury stock: 500.

Price: $43.

Issued: $40.