Section V - Equity Transactions (25 points) Coffey’s Coffee Shop was organized o
ID: 2536569 • Letter: S
Question
Section V - Equity Transactions (25 points)
Coffey’s Coffee Shop was organized on January 1, 2016 and was authorized to issue 200,000 shares of $2 par value common stock. Coffee had the following stock transactions in 2016.
1/1/2016 - Sold 30,000 shares of common stock at $22 per share.
4/1/2016 - Declared a cash dividend of $.40 per share, payable on 4/30/2016.
4/30/2016 - Dividend declared on 4/1/2016 was paid.
6/1/2016 - Declared a 100% stock dividend when the market price was $32 per share. Shares were issued on the same date (6/1).
8/31/2016 - Purchased 4,000 shares of company stock sold on 1/1/16 at $30 per share and elected to carry these as Treasury Stock instead of immediately retiring them.
10/1/2016 - Sold 1,500 of the treasury shares acquired on 8/31/2016 at $26 per share. 11/1/2016 - Sold 1,000 of the treasury shares acquired on 8/31/2016 at $32 per share.
REQUIRED:
Record the transactions listed above assuming that Coffey uses the cost method for treasury stock
Explanation / Answer
Note: The stock dividend declared being a large stock dividend, the market price of the shares is not taken into consideration.
Date Account Titles and Explanation Debit Credit 1/1/2016 Cash (30000 x $22) 660000 Common stock (30000 x $2) 60000 Paid-in capital in excess of par-common stock (30000 x $20) 600000 (To record issue of common stock) 4/1/2016 Dividends (30000 x $0.40) 12000 Dividends payable 12000 (To record declaration of cash dividends) 4/30/2016 Dividends payable 12000 Cash 12000 (To record distribution of dividends declared) 6/1/2016 Retained Earnings (30000 x $2) 60000 Common Stock 60000 (To record declaration and distribution of stock dividend) 8/31/2016 Treasury stock (4000 x $30) 120000 Cash 120000 (To record purchase of treasury stock) 10/1/2016 Cash (1500 x $26) 39000 Retained earnings [1500 x ($30 - $26)] 6000 Treasury stock (1500 x $30) 45000 (To record sale of treasury stock) 11/1/2016 Cash (1000 x $32) 32000 Treasury stock (1000 x $30) 30000 Paid-in capital-Treasury stock (1000 x $2) 2000 (To record sale of treasury stock)Related Questions
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