Question

Buffalo Corporation is authorized to issue 47,000 shares of $5 par value common stock. During 2020, Buffalo took part in the following selected transactions. 1. Issued 4,800 shares of stock at $44 per share, less costs related to the issuance of the stock totaling $5,800. 2. Issued 1,100 shares of stock for land appraised at $47,000. The stock was actively traded on a national stock exchange at approximately $45 per share on the date of issuance. 3. Purchased 470 shares of treasury stock at $46 per share. The treasury shares purchased were issued in 2016 at $43 per share. (a) Prepare the journal entry to record item 1. (b) Prepare the journal entry to record item 2. (c) Prepare the journal entry to record item 3 using the cost method.

Answer 1

cash 205,400 debit

common stock 24,000 credit

additional paid-in

excess of par value: 181,400 credit

land 47,000 debit

common stock 5,500 credit

additional paid-in

excess of par value: 41,500 credit

treasury stock 21,620 debit

cash 21,620 credit

Step-by-step explanation:

a) the cost will be subtract from the cash proceeds of the stocks:

stock cash income: 4,800 shares x $44 = 211,200

flotation cost: (5,800)

cash procced: 205,400

common stock (face value) 4,800 x $5 = 24,000

additional paid-in in excess of par value: 181,400

b)

land 47,000

common stock: 1,100 x 5 = 5,500

additional paid in: 41,500

c) purchase of treasury stock

cash disbursements: 470 x 46 = 21,620

treasury stock a cost therefore same as cash disbursements.