Question

P13-1A DeLong Corporation was organized on January 1. 2017. It is authorized to issue I0.000 shares of 8 %, $ 100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of $ 2 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $ 4 per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at $ 105 per share.

Apr: 1 issued 24,000 shares of common stock for land. The asking price of the land was $ 90.000. The fair value of the land was $ 85,000.

May 1 Issued 80.000 shares of common stock for cash at $ 4.50 per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $ 30,000 for services performed in helping the company organize.

Sept. 1 Issued 10,000 shares of common stock for cash at $ 5 per share.

Non. 1 Issued 1,000 shares of preferred stock for cash at $ 109 per share.

Instructions

(a) Journalize the transactions.

(b) Post to the stockholders' equity accounts. (Use J 5 as the posting reference.)

(c) Prepare the paid-in capital section of stockholders' equity at December 31,2017 .

P13- 2 A Fechter Corporation had the following stockholders' equity accounts on January 1 , 2017: Common Stock ($5 par) $ 500,000, Paid-in Capital in Excess of Par-Common Stock. $ 200,000, and Retained Earnings $ 100,000. In 2017 , the company had the following treasury stock transactions.

Mar: 1 Purchased 5,000 shares at $ 8 per share.

June 1 Sold 1,000 shares at $ 12 per share.

Sept. 1 Sold 2,000 shares at $ 10 per share.

Dec. 1 Sold 1,000 shares at $ 7 per share.

Fechter Corporation uses the cost method of accounting for treasury stock. In 2017 , the company reported net income of $ 30,000.

Instructions

(a) Journalize the treasury stock transactions, and prepare the closing entry at December 31 , 2017 , for net income.

Answer 1

P13-1A:

Requirement 1:

Date	Account title and explanation	Debit	Credit
Jan.10	Cash [80,000 x $4]	$320,000
	Common stock [80,000 x $2]		$160,000
	Paid-in capital in excess of stated value-common [80,000 x $2]		$160,000
	[Issuance of common stock]
Mar. 1	Cash [5,000 x $105]	$525,000
	Preferred stock [5,000 x $100]		$500,000
	Paid-in capital in excess of par-preferred		$25,000
	[Issuance of preferred stock]
Apr.1	Land	$85,000
	Common stock [24,000 x $2]		$48,000
	Paid-in capital in excess of stated value-common		$37,000
	[Issuance of common stock in exchange of land]
May 1	Cash [80,000 x $4.50]	$360,000
	Common stock [80,000 x $2]		$160,000
	Paid-in capital in excess of stated value-common [80,000 x $2.50]		$200,000
	[Issuance of common stock]
Aug.1	Organization costs	$30,000
	Common stock [10,000 x $2]		$20,000
	Paid-in capital in excess of stated value-common		$10,000
	[Issued common stock for organizational expenses]
Sept.1	Cash [10,000 x $5]	$50,000
	Common stock [10,000 x $2]		$20,000
	Paid-in capital in excess of stated value-common		$30,000
	[Issuance of common stock]
Nov.1	Cash [1,000 x $109]	$109,000
	Preferred stock [1,000 x $100]		$100,000
	Paid-in capital in excess of par-preferred		$9,000
	[Issuance of preferred stock]

Requirement 2:

Common stock
		Jan.10	$160,000
		Apr.1	$48,000
		May 1	$160,000
		Aug.1	$20,000
		Sept.1	$50,000
		End.	$438,000
Preferred stock
		Mar. 1	$500,000
		Nov.1	$100,000
		End.	$600,000
Paid-in capital in excess of stated value-common
		Jan.10	$160,000
		Apr.1	$37,000
		May 1	$200,000
		Aug.1	$10,000
		Sept.1	$30,000
		End.	$437,000
Paid-in capital in excess of par-preferred
		Mar. 1	$25,000
		Nov.1	$9,000
		End.	$34,000

Requirement 3:

DeLong Corporation
Balance Sheet (partial)
At December 31,2017
Stockholders' equity:
Paid-in capital
Common stock	$438,000
Preferred stock	$600,000
Paid-in capital in excess of stated value-common	$437,000
Paid-in capital in excess of par-preferred	$34,000
Total paid-in capital		$1,509,000

P13-2A:

Date	Account title and explanation	Debit	Credit
Mar 1	Treasury stock [5,000 x $8]	$40,000
	Cash		$40,000
	[Purchase of own shares]
June 1	Cash [1,000 x 12]	$12,000
	Paid-in capital in excess from treasury stock		$4,000
	Treasury stock [1,000 x $8]		$8,000
	[Sale of treasury stock]
Sept.1	Cash [2,000 x $10]	$20,000
	Paid-in capital in excess from treasury stock		$4,000
	Treasury stock [2,000 x $8]		$16,000
	[Sale of treasury stock]
Dec.1	Cash [1,000 x $7]	$7,000
	Paid-in capital in excess from treasury stock	$1,000
	Treasury stock [1,000 x $8]		$8,000
	[Sale of treasury stock]
Dec.31	Income summary	$300,000
	Retained earnings		$300,000
	[To close income summary account]