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Recording the Issuances of Common Stock & Treasury Stock

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During the first year of operation, Sitwell Corporation had the following transaction pertaining to its common stock.

Jan 10 Issued 80,000 shares for cash at $8 per share
Mar 1 Issued 5,000 shares to attorneys in payment of a bill for $35,000 for services rendered in helping the company to incorporate.
July 1 Issued 30,000 shares for cash at $8 per share.
Sept 1 Issued 60,000 shares for cash at $10 per share.

INSTRUCTION
(a) Prepare the journal entries for these transactions, assuming that the common stock has a par value of $3 per share.
(b) Prepare the journal entries for these transactions, assuming that the common stock is on-par with a stated value of $2 per share.

Before Gordon Corporation engages in the treasury stock transaction listed below, in general the ledger reflects, among others, the following account balances (par value of its stock is $30 per share).

Paid-in Capital in Excess of par-Common stock/ $99,000
Common stock/ $270,000
Retained Earning / $80,000

INSTRUCTION
Record the treasury stock transaction (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes.

(a) Bought 380 shares of treasury stock at $40 per share
(b) Bought 300 shares of treasury stock at $45 per share.
(c) Sold 350 shares of treasury stock at $45 per share
(d) Sold 110 shares of treasury stock at $38 per share.

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Solution Summary

This solution provides a detailed explanation of the questions presented by the student. All journal entries for Sitwell Corporation and Gordon Corporation are provided. Detailed calculations and entries are provided.

Solution Preview

Journal entries for the first question would be calculated as follows:

(A)

01-10 Cash 80,000 x 8 = 640,000 (Debit)
Common stock 80,000 x 3 = 240,000
Paid in excess of par 400,000 (640,000 - 240000)

03-01 Organizational expense 35,000
Common stock 5,000 x 3 = 15,000
Paid in capital, in excess of par 20,000 (35-15)

07-01 Cash 30,000 x 8 = 240,000
Common stock 30,000 x 3 = ...

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