Question

Pomona Corporation issued 60,000 shares of $3 par value common stock at $21 per share and 9,000 shares of $30 par value, ten percent preferred stock at $85 per share. Later, the company purchased 2,000 shares of its own common stock at $23 per share.

a. Prepare the journal entries to record the share issuances and the purchase of the common shares.
b. Assume that Pomona sold 1,500 shares of the treasury stock at $30 per share. Prepare the general journal entry to record the sale of this treasury stock.
c. Assume that Pomona sold the remaining 500 shares of treasury stock at $20 per share. Prepare the journal entry to record the sale of this treasury stock.

Answer 1

Answer and Explanation:

Pomona Corporation

a) Journal entry

i.

Dr Cash (60000*21) 1,260,000

Cr Common Stock (60000*3) 180,000

Cr Paid in capital in excess of par value-Common Stock 1080000

ii.

Dr Cash (9000*85) 765,000

Cr Preferred stock (9000*30) 270,000

Cr Paid in capital in excess of par value-Preferred 495,000

iii

Dr Treasury stock (2000*23) 46000

Cr Cash 46000

b) Journal entry

Dr Cash (1500*30) 45,000

Cr Paid in capital from sale of treasury

stock 10,500

Cr Treasury stock (1500*23) 34,500

c) Journal entry

Dr Cash (500*20) 10,000

Dr Paid in capital from sale of treasury stock 1,500

Cr Treasury stock (500*23) 11,500

Answer 2

The Journal Entries to record the transactions in the books of Pomona Corporation are as follows:

a. Debit Cash $1,260,000

Credit Common Stock $180,000

Credit Additional Paid-in Capital $1,080,000

• To record the issuance of 60,000 shares of $3 par value at $21.

Debit Cash $270,000

Credit Common Stock $27,000

Credit Additional Paid-in Capital $243,000

• To record the issuance of 9,000 shares of $3 par value at $30.

Debit Treasury Stock $6,000

Debit Additional Paid-in Capital $40,000

Credit Cash $46,000

• To record the purchase of 2,000 shares at $23 per share.

b. Debit Cash $45,000

Credit Treasury Stock $4,500

Credit Additional Paid-in Capital $40,500

• To record the resale of treasury stock (1,500 shares at $30 per share).

c. Debit Cash $10,000

Credit Treasury Stock $1,500

Credit Additional Paid-in Capital $8,500

• To record the resale of treasury stock (500 shares at $20 per share).

Data Analysis:

a. Cash $1,260,000 Common Stock $180,000 Additional Paid-in Capital $1,080,000

Cash $270,000 Common Stock $27,000 Additional Paid-in Capital $243,000

Treasury Stock $6,000 Additional Paid-in Capital $40,000 Cash $46,000

b. Cash $45,000 Treasury Stock $4,500 Additional Paid-in Capital $40,500

c. Cash $10,000 Treasury Stock $1,500 Additional Paid-in Capital $8,500

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