AC202 Quiz 1 Help

AC202 Quiz 1 Help - Quiz 1 Help Journal Entries for common...

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Quiz 1 Help Journal Entries for common stock reacquired and then sold from the treasury Record the following transactions of a company in general journal form: (a) Reacquired 8,000 of its own $10 par value common stock at $40 cash per share. The stock was originally issued at $15 per share. (b) Sold 2,000 shares of the stock reacquired under part (a) at $43 cash per share. (c) Sold 3,000 shares of the stock reacquired under part (a) at $39 cash per share. Solution go to problem Record the following transactions of a company in general journal form: (a) Reacquired 8,000 of its own $10 par value common stock at $40 cash per share. The stock was originally issued at $15 per share. This is a treasury stock. When treasury stock is purchased, it is recorded at the cost price. The original issue price is not relevant. The total cost is 8,000X40=$320,000. The journal entry is Treasury Stock Dr 320,000 Cash Cr 320,000 (b) Sold 2,000 shares of the stock reacquired under part (a) at $43 cash per share. When treasury stock is sold at a price higher than the cost price, the difference goes to paid in capital - treasury stock. The journal entry is Cash (2,000X43) Dr 86,000 Treasury Stock (2,000X40) Cr 80,000 Paid in Capital-Treasury Stock Cr 6,000 (c) Sold 3,000 shares of the stock reacquired under part (a) at $39 cash per share. When treasury stock is sold at a price less than the cost price, the difference is first debited to paid in capital-treasury stock. If the balance in this account is not sufficient, the balance amount remaining is debited to retained earnings. In this case the difference is (40-39)X3,000=$3,000 and there is a balance of $6,000 on paid-in capital-treasury stock and so no debit to retained earnings. The journal entry is Cash Dr (3,000X39) 117,000 Paid in Capital - Treasury Stock Dr 3,000 Treasury Stock (3,000X40) Cr 120,000 Quiz 2 Help
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On January 1, a company issues bonds with a par value of $300,000. The bonds mature in 5 years and pay 8% annual ( this should be semi annual) interest each June 30 and December 31. On the issue date, the market rate of interest is 6%. Compute the price of the bonds on their issue date. The following information is taken from present value tables: Present value of annuitiy for 10 periods at 3% 8.5302 Present value of annuitiy for 10 periods at 4% 8.1109 Present value of 1 due in 10 periods at 3% 0.7441 Present value of 1 due in 10 periods at 4% 0.6756 The price of the bonds is the present value of interest and principal. The annual interest is 300,000X8% = 24,000 and the principal amount is $300,000. Interest is an annuity and so we use the PV of annuity. Principal is a lump sum and so we use PV of $1. The discounting rate is the market rate of interest which is 6%. The tables above imply semi annual interest payment as we are given for 10 periods and 3% and 4% rate. Doing on semi annual basis, semi annual interest would be 12,000, periods would be 10 and rate would be 6%/2 = 3% Price of bonds = 12,000 X 8.5302 + 300,000 X 0.7441
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AC202 Quiz 1 Help - Quiz 1 Help Journal Entries for common...

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