Question

Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp. Great Adventures has authorized $1 par value common stock. When the company began on July 1, 2021, Tony and Suzie each purchased 10,000 shares (20,000 shares total) of $1 par value common stock at $1 per share. The following transactions affect stockholders’ equity during the remainder of 2022:

Required:

Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

1) November 5 Issue an additional 120,000 shares of common stock for $10 per share.

2) November 16 Purchase 12,000 shares of its own common stock (i.e., treasury stock) for $25 per share.

3) November 24 Resell 6,000 shares of treasury stock at $26 per share.

4) December 1 Declare a cash dividend on its common stock of $13,800 ($0.10 per share) to all stockholders of record on December 15.

5)December 20 Pay the cash dividend declared on December 1.

6)December 31 Pay $850,000 for construction of new cabins and other facilities. The entire expenditure is recorded in the Buildings account.

Answer 1

No.	Date	General Journal	Debit	Credit
1	November 5	Cash (120000 x $10)	1200000
		Common stock (120000 x $1)		120000
		Additional paid-in capital-common stock		1080000
		(To record the issuance of additional shares)
2	November 16	Treasury stock (12000 x $25)	300000
		Cash		300000
		(To record purchase of own common stock)
3	November 24	Cash (6000 x $26)	156000
		Treasury stock (6000 x $25)		150000
		Additional paid-in capital from treasury stock		6000
		(To record the sale of treasury stock)
4	December 1	Cash dividends	13800
		Cash dividends payable		13800
		(To record declaration of cash dividends)
5	December 20	Cash dividends payable	13800
		Cash		13800
		(To record the payment of cash dividends)
6	December 31	Buidlings	850000
		Cash		850000
		(To record cost of new cabins and other facilities)