Johannesburg Company has the following [in rands (R), the South African unit of

Question

Johannesburg Company has the following [in rands (R), the South African unit of currency]: Common stock, 2,000,000 shares, R3 par value Paid-in capital in excess of par Total paid-in capital Retained income Stockholders' equity Overall market value of stock @ assumed market price of R 6.000,000 34.000,000 40,000,000 18,000.000 R58,000,000 R40 per share R80.000,000 Book value per share-R 58,000,000 2.000.000 -R29 1. The company used cash to reacquire 150,000 shares for R40 each and held them in the treasury. Prepare the stockholders' equity section after the acquisition of treasury stock. Also prepare the journal entry. 2. Suppose all the treasury stock is sold for R50 per share. Prepare the journal entry. 3. Suppose all the treasury stock is sold for R30 per share. Prepare the journal entry. 4. Recalculate book value after each preceding transaction.

Explanation / Answer

Answer =1) STOCKHOLDER'S EQUITY SECTION AMOUNT Common Stock, 2000,000 Shares R 3 Par Value                 60,00,000 Paid in Capital Excel of Par             3,40,00,000 Total Paid in Capital             4,00,00,000 Retained Earning             1,80,00,000 Less: Treasurry stock (150,000 Shares X 40)               -60,00,000 Total             5,20,00,000 Journal Entries Date Account Title and explanation Debit Credit Answer =1) Treasurry Stock(150,000 X 40)                 60,00,000           To Cash                   60,00,000 (To Record the purchase of treasurry stock) Cash (150,000 X 50)                 75,00,000 Answer =2)        To Treasurry Stock                   60,00,000        To Paid in capital from Treasurry stock                   15,00,000 (To record the sale of treasurry Stcok) Cash (150,000 X $ 30)                 45,00,000 Answer =3) Paid in capital from Treasurry stock (Balance)                 15,00,000        To Treasurry Stock                   60,00,000 (To record the sale of treasurry Stcok at ) Answer = 4) Book Value per shares = After Purhcase of tresurry Stock: Balance in Retained Earning             5,20,00,000 "/" By number of shares outstanding (2,000,000 -150,000)                 18,50,000 Book value Per Shares                         28.11

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