Question

Kaldon, Inc. acquired 2,500 of its own shares at $30 per share. The shares are to be held in treasury. The par value of Kaldon’s common stock is $4 per share. If Kaldon were to resell all its treasury stock at $32 per share, what journal entry would Kaldon make?

Answer 1

The journal entries Kaldon, Inc. needs to make are as followed:

Dr Cash 80,000

Cr Common share 75,000

Cr Paid-in capital 5,000

(to record the sale of repurchase share)

Step-by-step explanation:

Calculation notes:

As Kaldon, Inc. sell 2,500 shares at $32, the cash proceed the company gets is 2,500 x 32 = $80,000.

As Kaldon, Inc. had previously repurchased the shares at $30, the value of common shares should be recorded at $30 per share in the sell of repurchased shares transaction. Thus, total value of common share repurchased is 30 x 2,500 = $75,000.

The difference amount between Cash Receipt and Value of common share recorded will be recorded in Paid-in capital account : 80K - 75K = 5,000.