A company has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during Year 1, its first year of operations: January 2 Issues 100,000 shares of common stock for $26 per share. February 6 Issues 2,100 shares of 9% preferred stock for $11 per share. September 10 Purchases 11,000 shares of its own common stock for $31 per share. December 15 Resells 5,500 shares of treasury stock at $36 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 and Explanation:

The journal entries are shown below:

On Jan 2

Cash (100,000 shares  × $26)$2,600,000  

        To Common Stock  (100,000 shares  × $1)$100,000

        To Paid in capital in excess of par value - Common Stock  $2,500,000

On Feb 6

Cash (2,100 shares × $11)$23,100

         To Preferred stock(2,100 shares × $10)$21,000

         To Paid in capital in excess of par value-preferred stock$2,100

On Sep 10

Treasury Stock (11,000 × $31)$341,000

           To Cash$341,000

(Being the purchase of own common stock is recorded)

On Dec 15

Cash (5,500 shares × $36)$198,000

              To Treasury Stock (5,500 shares × $31)  $170,500

              To Paid in capital from sale of treasury stock  $27,500

(Being the resells of treasury stock is recorded)