Question

QUESTION 9 Talboe Co, issued 90,000 shares of $9 par common stock for $1,500,000. A year later Talboe acquired 12,000 shares of its own common stock at $12 per share. Three months later Talboe sold 5,000 of these shares at $20 per share. Talboe Co. uses the cost method to record treasury stock transactions. Select which is the correct journal entry when Talboe Co. issue the stock. Debit Cash - 5810,000, Debit Dividends - $690,000; Credit Common Stock Par - $810,000, Credit Paid in Capital Excess of Par C... $690,000 Debit Cash - $1,500,000; Credit Common Stock Par - $810,000, Credit Paid in Capital Excess of Par C.S. - $690,000 O Debit Cash - $1,500,000; Credit Common Stock Par - $690,000, Credit Paid in Capital Excess of Par C.S. - $810,000 O Debit Cash - $1,500,000; Credit Common Stock Par - $1,500,000

Answer 1

9.

Number of common shares issued = 90,000

Par value per share = $9

Issue price = $1,500,000

Amount to be credited to common stock = Number of common shares issued x Par value per share

= $810,000

Amount to be credited to paid in capital in excess of par - common stock = Issue price - (Number of common shares issued x Par value per share)

= 1,500,000- (90,000 x 9)

= 1,500,000-810,000

= $690,000

The journal entry to record issue of common stock will be:

General Journal	Debit	Credit
Cash	1,500,000
Common stock		810,000
Paid in capital in excess of par- common stock		690,000

Second option is correct.

10.

Number of shares acquired = 12,000

Cost per share = $12

Amount to be debited to Treasury stock = Number of shares acquired x Cost per share

= 12,000 x 12

= $144,000

The following journal entry will be made to record purchase 12,000 share of stock:

General Journal	Debit	Credit
Treasury stock	144,000
Cash		144,000

Fourth option is correct.

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