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Bailey Corporation

During 2006, Bailey Corporation incurred the following transactions:

Jan 1: Issued 25,000 shares of $2 par value common stock at $10 per share.

June 15: Reacquired 2,000 shares of common stock sold on Jan. 1 for $11 per share.

Aug. 10: Sold 1,000 shares of its treasury stock purchased on June 15 for $11.50 per share.

Sept. 30: The board of directors declares a 10% stock dividend on the common stock. The current selling price of the common stock is $13 per share.

Nov. 30: The board of directors declares a cash dividend of $.50 per share payable to stockholders on December 15.

Dec. 15: Paid the cash dividends declared on November 30.

Required: a. Record journal entries for the above transactions. b. Prepare the stockholder's equity section of the balance sheet for Bailey Corporation as of Dec. 2006. The retained earnings account had a value of $100,000 before the above transactions.

Solution Preview

During 2006, Bailey Corporation incurred the following transactions:

Jan 1: Issued 25,000 shares of $2 par value common stock at $10 per share.

Jan. 1 Cash 250,000
Common Stock 50,000
Paid-in Capital in Excess of Par Value 200,000

For cash, you need to debit the whole amount received by multiplying 25,000 shares with $10 per share. Then, you need to credit the common stock by multiplying 25,000 shares with par value of $2. The remaining is the paid-in capital in excess of par value.

June 15: Reacquired 2,000 shares of common stock sold on Jan. 1 for $11 per share.

June 15 Treasury Stock 22,000
Cash 22,000

The share reacquired by the company is known as treasury stock. Therefore, you only need to debit the amount of shares reacquired multiply by cost of ...

Solution Summary

This solution is comprised of a detailed explanation to record and prepare the journal entries and stockholder's equity section of the balance sheet for Bailey Corporation.

$2.19