Question

Buffalo Corporation is authorized to issue 47,000 shares of $5 par value common stock. During 2020, Buffalo took part in the following selected transactions. 1. Issued 4,800 shares of stock at $44 per share, less costs related to the issuance of the stock totaling $5,800. 2. Issued 1,100 shares of stock for land appraised at $47,000. The stock was actively traded on a national stock exchange at approximately $45 per share on the date of issuance. 3. Purchased 470 shares of treasury stock at $46 per share. The treasury shares purchased were issued in 2016 at $43 per share. (a) Prepare the journal entry to record item 1. (b) Prepare the journal entry to record item 2. (c) Prepare the journal entry to record item 3 using the cost method.

Answer 1

Answer:

cash         205,400 debit

       common stock            24,000 credit

       additional paid-in

        excess of par value:   181,400 credit

land          47,000 debit

       common stock             5,500 credit

       additional paid-in

        excess of par value:   41,500 credit

treasury stock         21,620 debit

          cash                                  21,620 credit

Explanation:

a) the cost will be subtract from the cash proceeds of the stocks:

stock cash income: 4,800 shares x $44 = 211,200

                            flotation cost:                    (5,800)

                            cash procced:                205,400

common stock (face value) 4,800 x $5  =   24,000

additional paid-in in excess of par value:   181,400

b)

land                                   47,000

common stock: 1,100 x 5 = 5,500

additional paid in:             41,500

c) purchase of treasury stock

cash disbursements: 470 x 46 = 21,620

treasury stock a cost therefore same as cash disbursements.