Question

A. ABC Company was incorporated on September 1, 2018. The company had two transactions below related...

A. ABC Company was incorporated on September 1, 2018. The company had two transactions below related to its ordinary shares with a par value of $5 per share.

September 1: Issued 8,000 ordinary shares for cash at $5 per share.

November 16: Issued 20,000 ordinary shares for a patent with a fair value of $300,000.

Required: Prepare journal entries for the two transactions above for ABC Company.

5 marks

B. ABC Company has the following treasury share transactions during November 2018 for the first time after its incorporation:

November 1: Bought 5,000 ordinary shares at $29 a share.

November 13: Sold 2,500 treasury shares at $30 a share.

Required: Prepare journal entries for the two transactions above for ABC Company using the cost method.

5 marks

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Answer #1

A)

Date Account title Debit credit
September 1 cash 40000
common stock (8000*5) 40000
November 16 Patent 300000
common stock (20000*5) 100000
paid in capital in excess of par -common stock 200000

B)

Date Account title Debit credit
November 1 Treasury stock 145000
cash (5000*29) 145000
November 13 cash (2500*30) 75000
Treasury stock (2500*29) 72500
paid in capital in excess of cost -treasury stock 2500
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