Question

Equity section of Sol Corporation shows the following on January 1, 2018.

Shares Ordinary – Ordinary, $1 par value 1,000,000 shares authorized,
500,000 shares issued and outstanding $500,000

Shares premium – Ordinary 500,000

Retained earnings 1,750,000
   
Total Equity       $ 2,750,000

During the year, the company had following transactions occurred:
Mar. 1 Issued 50,000 ordinary shares for $150,000.
Jun. 1 Acquired 5,000 shares of its shares for the treasury at $4 per share
Sep. 1 Sold 3,000 shares at $5 per share
Dec 1 Declared a cash dividend of $2 per share to shareholders of record on Dec 15.
Dec 30 Paid cash dividend.



Q1) Prepare journal entries to record the above transactions.

Answer 1

Solution:

Journal Entries
Date	Account Title and Explanation	Debit	Credit
01-Mar	Cash Dr	$1,50,000.00
	To Common Stock (50000*$1)		$50,000.00
	To Shares Premium - Ordinary		$1,00,000.00
	(To record issue of shares)
01-Jun	Treasury Stock Dr (5000*$4)	$20,000.00
	To Cash		$20,000.00
	(To record purchase of Treasury stock)
01-Sep	Cash Dr (3000*$5)	$15,000.00
	To Treasury Stock (3000*$4)		$12,000.00
	To Paid in Capital from Treasury Stock		$3,000.00
	(To record sales od 3000 treasury shares)
01-Dec	Retained Earnings Dr [(500000+50000-2000)*$2]	$10,96,000.00
	To Dividend Payable		$10,96,000.00
	(To record dividend declared)
30-Dec	Dividend Payable Dr	$10,96,000.00
	To Cash		$10,96,000.00
	(To record dividend paid)