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23 July, 06:38

Ayayai Corporation is authorized to issue 46,000 shares of $5 par value common stock. During 2020, Ayayai took part in the following selected transactions. 1. Issued 5,000 shares of stock at $49 per share, less costs related to the issuance of the stock totaling $5,400. 2. Issued 1,200 shares of stock for land appraised at $46,000. The stock was actively traded on a national stock exchange at approximately $50 per share on the date of issuance. 3. Purchased 480 shares of treasury stock at $44 per share. The treasury shares purchased were issued in 2016 at $41 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.

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  1. 23 July, 07:17
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    Question:

    Ayayai Corporation is authorized to issue 46,000 shares of $5 par value common stock. During 2020, Ayayai took part in the following selected transactions.

    1. Issued 5,000 shares of stock at $49 per share, less costs related to the issuance of the stock totaling $5,400.

    2. Issued 1,200 shares of stock for land appraised at $46,000. The stock was actively traded on a national stock exchange at approximately $50 per share on the date of issuance.

    3. Purchased 480 shares of treasury stock at $44 per share. The treasury shares purchased were issued in 2016 at $41 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:

    a.

    Cash = $239,600

    Common Stock = $25,000

    Paid in Capital = $214,000

    b.

    Land: = $60,000

    Common Stock: = $6,000

    Paid in Capital = $54,000

    c.

    Treasury Stock: $21,120

    Cash: $21,500

    Explanation:

    a.

    Cash

    Cash is calculated as: 5,000 shares * $49 market price/share - $5,400 of issue costs]

    Cash = $239,600

    Common Stock

    Common Stock is calculated as: 5,000 shares * $5 par value/share

    Common Stock = $25,000

    Paid-in Capital in Excess of Par - Common Stock

    This is calculated by: Cash - Common Stock = $239,000 - $25,000

    Paid in Capital = $214,000

    b.

    Land:

    Land is calculated as 1,200 shares * $50 market price/share = $60,000

    Common Stock:

    Common Stock is calculated as: 1,200 shares * $5 par value/share = $6,000

    Paid-in Capital in Excess of Par - Common Stock

    This is calculated by: Land - Common Stock = $60,000 - $6,000

    Paid in Capital = $54,000

    c. Treasury Stock is calculated as:

    480 stocks * $44 cost per share

    = $21,120

    Cash: $21,500
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