Question

Bay Meadows Corporation designs and produces a line of golf equipment and golf apparel. Bay Meadows has 100,000 shares of common stock outstanding as of the beginning of 2024, Bay Meadows has the following transactions affecting stockholders' equity in 2024.

March 1 Issues 51,000 additional shares of $1 par value common stock for $48 per share.
May 10 Purchases 4,600 shares of treasury stock for $51 per share.
June 1 Declares a cash dividend of $1.30 per share to all stockholders of record on June 15. (Hint: Dividends are not paid on treasury stock.)
July 1 Pays the cash dividend declared on June 1.
October 21 Resella 2,300 shares of treasury stock purchased on May 10 for $56 per share.
Required:
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 1

Journal Entries for Bay Meadows Corporation Transactions:

March 1:

Debit: Cash (51,000 shares * $48/share) = $2,448,000

Credit: Common Stock (51,000 shares * $1/share) = $51,000

Credit: Paid-in Capital in Excess of Par Value - Common Stock = $2,397,000

May 10:

Debit: Treasury Stock (4,600 shares * $51/share) = $234,600

Credit: Cash = $234,600

June 1:

Debit: Dividends Payable (100,000 shares outstanding * $1.30/share) = $130,000

Credit: Dividends = $130,000

July 1:

Debit: Dividends Payable = $130,000

Credit: Cash = $130,000

October 21:

Debit: Cash (2,300 shares * $56/share) = $128,800

Credit: Treasury Stock (2,300 shares * $51/share) = $117,300

Credit: Paid-in Capital in Excess of Par Value - Treasury Stock = $11,500

March 1: Issuing new shares increases cash and common stock, with the excess going to paid-in capital.

May 10: Treasury stock purchase increases treasury stock and decreases cash.

June 1: Declaring dividends creates a liability (dividends payable) and decreases retained earnings.

July 1: Paying dividends decreases dividends payable and cash.

October 21: Reselling treasury stock increases cash and decreases treasury stock, with the gain going to paid-in capital.

These entries ensure an accurate recording of Bay Meadows Corporation's stockholders' equity transactions for 2024.