Question

Buffalo Corporation is authorized to issue 45,000 shares of $5 par value common stock. During 2020, Buffalo took part in the following selected transactions.

1. Issued 4,500 shares of stock at $48 per share, less costs related to the issuance of the stock totaling $6,300.
2. Issued 1,100 shares of stock for land appraised at $45,000. The stock was actively traded on a national stock exchange at approximately $49 per share on the date of issuance.
3. Purchased 530 shares of treasury stock at $46 per share. The treasury shares purchased were issued in 2016 at $43 per share.
Instructions:(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

A

Dr Cash $209,700

Cr Paid-In-Capital in excess of par-common stock $187,200

Cr Common Stock $22,500

B. Dr Land $53,900

Cr Common Stock $5,500

Cr Paid-In-Capital in excess of par-common stock $48,400

C. Dr Treasury Stock $24,380

Cr Cash $24,380

Step-by-step explanation:

A. Preparation of the journal entry to record item1

Dr Cash (4,500*$48-6,300) $209,700

Cr Paid-In-Capital in excess of par-common stock $187,200

($209,700-$22,500)

Cr Common Stock $22,500

(4,500*$5)

(Being to record common stock issued)

B. Preparation of the journal entry to record item 2

Dr Land (1,100*$49) $53,900

Cr Common Stock $5,500

(1,100*$5)

Cr Paid-In-Capital in excess of par-common stock $48,400

($53,900-$5,500)

(Being to record land puchased in exchange for common stock)

C. Preparation of the journal entry to record item 3 using the cost method

Dr Treasury Stock $24,380

(530*$46)

Cr Cash $24,380

(Being to record purchase of treasury stock)