Ask Question
11 July, 08:07

Blossom Corporation is authorized to issue 49,000 shares of $5 par value common stock. During 2017, Blossom took part in the following selected transactions:

1. Issued 4,500 shares of stock at $45 per share, less costs related to the issuance of the stock totaling $7,900.

2. Issued 1,100 shares of stock for land appraised at $49,000. The stock was actively traded on a national stock exchange at approximately $46 per share on the date of issuance.

3. Purchased 470 shares of treasury stock at $41 per share. The treasury shares purchased were issued in 2013 at $38 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.

+2
Answers (1)
  1. 11 July, 09:56
    0
    See explanation section

    Explanation:

    Requirement A

    Debit Cash $194,600

    Credit Common stock - Par value $ 22,500

    Credit Common stock - Additional paid-in-capital $172,100

    Calculation:

    Cash: 4,500 shares * $45 = $202,500

    As the company's par value is $5,

    Common stock - Par value: 4,500 shares * $5 = $22,500

    As the market value of the stock is $45, the additional stock value = $45 - $5 = $40. Moreover, the company has issuance cost of $7,900

    Additional common stock apart from par value minus the issuance cost = ($4,500 shares * $40) - $7,900 = $180,000 - $7,900 = $172,100.

    The company issue common stock with a market value of $45 and issuance cost of $7,900 in exchange of cash.

    Requirement B

    Debit Land $50,600

    Credit Common stock - Par value $ 5,500

    Credit Common stock - Additional paid-in-capital $45,100

    Calculation:

    Land: 1,100 shares * $46 = $50,600

    As the company's par value is $5,

    Common stock - Par value: 1,100 shares * $5 = $5,500

    As the market value of the stock is $46, the additional stock value = $46 - $5 = $41.

    Additional common stock apart from par value = ($1,100 shares * $41) = $45,100.

    Although the land is appraised for $49,000, due to the increased market price stock, it is valued more.

    The company issue common stock with a market value of $46 in exchange for land.

    Requirement C

    Debit Treasury Stock $19,270

    Credit Cash $19,270

    Purchasing share from the stock market is known as treasury stock.

    Calculation: Treasury stock = 470 shares * $41 = $19,270

    Debit Cash $17,860

    Credit Common Stock - par value $2,350

    Credit Common stock - Additional paid-in-capital $15,510

    Calculation:

    As the company's par value is $5,

    Common stock - Par value: 470 shares * $5 = $2,350

    Additional common stock apart from par value = $470 shares * ($38 - $5) = $15,510.

    The company issue common stock with a market value of $38 after purchasing those treasury stock at $41 per share.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Blossom Corporation is authorized to issue 49,000 shares of $5 par value common stock. During 2017, Blossom took part in the following ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers