Exercise 15-6 Flounder Corporation is authorized to issue 54,000 shares of $5 pa

Question

Exercise 15-6 Flounder Corporation is authorized to issue 54,000 shares of $5 par value common stock. Ouring 2017, Flounder took part in the following selected transactions. 1, Issued 5,200 shares of stock at 42 per share, less costs related to the issuance of the stock totaling $5,900. 2. Issued 1,000 shares of stock for land appralsed at $54,000. The stock was actively traded on a natlonal stock exchange at approxlmately $43 per share on the date of Issuance. 3. Purchased 460 shares of treasury stock at $43 per share. The treasury shares purchased were issued in 2013 at $40 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. cally indented No Entry" for the Credit account titles are automati No. Account Titles and Explanation (a) Cash when amount as entered. Do not indent manually. If no entry is required, select account titles and enter 0 for the arnounts Debit Credit Common Stock Paid-in Capital in Excess of Par- Common Stock b Land Common Stock Paid-in Capital in Excess of Par-Common Stock () Treasury Stock Cash

Explanation / Answer

Note Cash = (Shares X market Price / share) - Issue Cost

1) 5200 shares x $ 42 = $ 218,400

$218,400 - $5,900

= $212,500

2) Common Stock = Shares X par value per share

= 5200 X 5 per share = $26,000

3) 1000 shares X 43 per share = $43,000

Since fair value of stock is used to value the exchange

a) Cash (note:1) $212,500 Common Stock (note : 2) $26,000 Paid up capital inexcess of par common stock $186,500 b) Land (note: 3) $43,000 Common Stock (1000 shares X 5 per share) $5,000 Paid up capital inexcess of par common stock $38,000 c) Treasury stock (460X43) $19,780 Cash $19,780

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