Exercise 1:
An inexperienced accountant for Moon Corporation made the following entries.
July 1 Cash.................................................................... 210,000
Common Stock............................................ 210,000
(Issued 15,000 shares of no-par common stock,
stated value $10 per share)
Sept. 1 Common Stock................................................... 28,000
Retained Earnings............................................... 6,000
Cash............................................................. 34,000
(Purchased 2,000 shares issued on July 1 for the
treasury at $17 per share)
Dec. 1 Cash.................................................................... 18,000
Common Stock............................................ 14,000
Gain on Sale of Stock.................................. 4,000
(Sold 1,000 shares of the treasury stock at $18 per
share)
Instructions: On the basis of the explanation for each entry, prepare the entry that should have been made for the transactions. (Omit explanations.)
Exercise 2:
The stockholders' equity section of Palmer Corporation's balance sheet at December 31, 2007, appears below:
Stockholders' equity
Paid-in capital
Common stock, $10 par value, 400,000 shares authorized;
250,000 issued and outstanding $2,500,000
Paid-in capital in excess of par 1,200,000
Total paid-in capital 3,700,000
Retained earnings 600,000
Total stockholders' equity $4,300,000
During 2008, the following stock transactions occurred:
Jan. 18 Issued 50,000 shares of common stock at $30 per share.
Aug. 20 Purchased 25,000 shares of Palmer Corporation's common stock at $24 per share to be held in the treasury.
Nov. 5 Reissued 9,000 shares of treasury stock for $28 per share.
Instructions
(a) Prepare the journal entries to record the above stock transactions.
(b) Prepare the stockholders' equity section of the balance sheet for Palmer Corporation at December 31, 2008. Assume that net income for the year was $100,000 and that no dividends were declared.