Question

Borner Communications’ articles of incorporation authorized the issuance of 135 million common shares. The transactions described...

Borner Communications’ articles of incorporation authorized the issuance of 135 million common shares. The transactions described below effected changes in Borner’s outstanding shares. Prior to the transactions, Borner’s shareholders’ equity included the following:

Shareholders’ Equity ($ in millions)
Common stock, 115 million shares at $1 par $ 115
Paid-in capital – excess of par 345
Retained earnings 305


Required:
Assuming that Borner Communications retires shares it reacquires (restores their status to that of authorized but unissued shares), record the appropriate journal entry for each of the following transactions: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

  1. On January 7, 2021, Borner reacquired 2 million shares at $5.50 per share.
  2. On August 23, 2021, Borner reacquired 4 million shares at $3.00 per share.
  3. On July 25, 2022, Borner sold 3 million common shares at $6 per share.

Homework Answers

Answer #1
Answer:
Date Accounts Title and Explanation Debit
(in $ millions)
Credit
(in $ millions)
Jan 7, 2021 Common stock
(2million x $1 )
$2
Paid-in capital - Excess of par
(2 million shares x $345 / $115)
$6
Retained earnings   (Bal Fig/ Plug) $3
Cash
(2 million x $5.50 )
$11
(To record the reacquisition of Shares)
Aug 23, 2021 Common stock
(4 million x $1 )
$4
Paid-in capital—excess of par
(4 million x $345 / $115)
$12
      Paid-in capital—share repurchase   (Bal. Fig) $4
Cash
(4 million x $3)
$12
(To record the reacquisition of Shares)
July 25, 2022 Cash
(3 million x $6 )
$18
Common stock
(3 million x $1)
$3
Paid-in capital—excess of par (Bal. fig.) $15
(To record the Sale of Common Shares)
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