Question

Kingbird Corporation is authorized to issue 47,000 shares of $5 par value common stock. During 2020, Kingbird took part in the following selected transactions.

1. Issued 5,500 shares of stock at $44 per share, less costs related to the issuance of the stock totaling $7,200.
2. Issued 1,200 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 520 shares of treasury stock at $45 per share. The treasury shares purchased were issued in 2016 at $42 per share.
Required:
(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

Answer and Explanation:

Journal Entry

a).

Cash A/c (5500 × 44)-7200 Dr. $234,800

To Common stock A/c(5500×5) $27,500

To Paid-In capital in excess of par-common stock A/c $207,300

($234,800 - $27,500)

(To record common stock issued)

b).

Land A/c(1200×$45) Dr. $54,000

To Common stock A/c(1200×$5) $6,000

To Paid-In capital (in excess of par-common stock) A/c $48,000

($54,000 - $6,000)

(To record land purchased in exchange of common stock)

c).

Treasury stock A/c(520×$45) Dr. $23,400

To Cash A/c $23,400

(To record purchase of treasury stock)