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28 June, 17:44

Kaldon, Inc. acquired 2,500 of its own shares at $30 per share. The shares are to be held in treasury. The par value of Kaldon's common stock is $4 per share. If Kaldon were to resell all its treasury stock at $32 per share, what journal entry would Kaldon make?

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  1. 28 June, 19:18
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    The journal entries Kaldon, Inc. needs to make are as followed:

    Dr Cash 80,000

    Cr Common share 75,000

    Cr Paid-in capital 5,000

    (to record the sale of repurchase share)

    Explanation:

    Calculation notes:

    As Kaldon, Inc. sell 2,500 shares at $32, the cash proceed the company gets is 2,500 x 32 = $80,000.

    As Kaldon, Inc. had previously repurchased the shares at $30, the value of common shares should be recorded at $30 per share in the sell of repurchased shares transaction. Thus, total value of common share repurchased is 30 x 2,500 = $75,000.

    The difference amount between Cash Receipt and Value of common share recorded will be recorded in Paid-in capital account : 80K - 75K = 5,000.
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