Treasury Stock Pomona Corporation issued 60,000 shares of $3 par value common stock at $21 per share and 9,000 shares of $30 par value, ten percent preferred stock at $85 per share. Later, the company purchased 2,000 shares of its own common stock at $23 per share. a. Prepare the journal entries to record the share issuances and the purchase of the common shares.

Issuance

Common Stock

Dr. Cash                                          $1,260,000

Cr. Common Stock                                                 $180,000

Cr. Paid-in-Capital excess of par common stock $1,080,000

Preferred Stock

Dr. Cash                                          $765,000

Cr. Preferred Stock                                                 $270,000

Cr. Paid-in-Capital excess of par Preferred stock $495,000

Treasury Stock Purchase

Dr. Treasury Stock    $46,000

Cr. Cash                     $46,000

Explanation:

Common Shares are issued at a specified price, we need to record the par value of the share in common stock account and The value excess of par in the Paid-in-Capital Excess of par common stock separately.

Issuance of 60,000 shares

Par value = $60,000 x 3 = $180,000

Excess of par value = ($21 - $3 ) x 60,000 = $1,080,000

Preferred stock has also recorded same as the common but in different accounts

Par Value = 9,000 x $30 = $270,000

Excess of par value = ($85 - $30) x 9,000 = $495,000

Treasury stocks are the company's own shares which is repurchased by the company. It is recorded in treasury shares account which is an contra equity account. I can be reissued or cancelled by the company.

Purchase of Treasury Stock

Treasury Stock = 2,000 x $23 = $46,000