Question 1: (5 marks: 1 mark for each transaction). Beta Company had the followi

Question

Question 1: (5 marks: 1 mark for each transaction). Beta Company had the following transactions. 1. Paid $2,000 fees to incorporate. 2. Issued 10,000 shares of common stock with a stated value of $ 5 for $ 550,000. 3. Issued 3,000 shares of $100 par value preferred stock at $107 for cash. 4. Issued 15,000 shares, $10 par value, and common stock in exchange for a building. Beta common stock has been actively traded on the stock exchange at $27 per share. 5. Purchased 2,000 shares for the treasury for 20 $ as purchase price. Instructions: Prepare the journal entries to record the above stock transactions. (1 mark for each transaction). Question 2: (5 marks: each case 2.5 marks). Sigma Corporation purchased 2,000 shares of its $5 par value common stock for a cash price of $12 per share. Two months later, Sigma sold the treasury stock for a cash price of $10 per share. Instructions: Prepare the journal entry to record the sale of the treasury stock assuming (a) No balance in Paid-in Capital from Treasury Stock. (2.5 marks) (b) A $3,000 balance in Paid-in Capital from Treasury Stock. (2.5 marks)

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. BETA Date Account Debit Credit 1 Incorporation Expense 2000 Cash 2000 2 Cash 550000 Common Stock (10000*5) 50000 Additional Paid in Capital 500000 3 Cash 3000*107 321000 Preferred Stock (3000*100) 300000 Additional Paid in Capital 21000 4 Building (15000*27) 405000 Common Stock (15000*10) 150000 Additional Paid in Capital 255000 5. Treasury Shares 40000 Cash 40000 SIGMA 1. Cash 2000*10 20000 Retained Earning 4000 Treasury Shares 2000*12 24000

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