Question

Pharoah Company had the following Shareholders' Equity accounts as of May 1, 2020: $1,008,000 665,500 Share capital: Preferred shares, 80,000 issued and outstanding Class A common shares, 110,000 issued and outstanding Class B common shares, 330,000 issued and outstanding Retained earnings Total shareholders' equity 1,666,500 3,285,000 $6,625,000 On June 10, Pharoah reacquired and cancelled 1,900 Class A common shares at a cost of $5.20 per share. On August 26, 2020, Pharoah issued 3,800 Class A common shares for $9.45 each. On September 30, the company reacquired and cancelled another 1,900 Class A common shares at $9.45 per share. Prepare the journal entries required to record these transactions. (Round per share value to 4 decimal places, e.g. 1.2512 and final answer to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts. Record journal entries in the order presented in the problem.) Account Titles and Explanation Debit Credit Date June 10 Sept. 30

Answer 1

When the stock are repurchase for retirement, Common stock account is debited at par value, Paid in capital in Excess of par is debited at which those shares were issued and if any amount is remaining then retained earnings are debited and cash is credited Debit $11,495 Credit [$665500/110000x1900) $1,615 $9,880[1900 x $5.20] $35,910 [3800 x $9.45] Sr. No. Date Account Title June 10 Class A Common Stock Retained Earnings Cash (To record retirement of common stock) 2 Aug 26 Cash Class A Common Stock (To record issue of class A common stock) 3 Sep 30 Class A Common Stock Retained Earnings Cash (To record retirement of common stock) Cancellation of Stock is done on FIFO basis. $35,910 [$665500/110000x3800] $22,990 $12,920 $35,910 (3800 x $9.45]