Question

Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp.

Great Adventures has authorized $1 par value common stock. When the company began on July 1, 2021, Tony and Suzie each purchased 10,000 shares (20,000 shares total) of $1 par value common stock at $1 per share. The following transactions affect stockholders’ equity during the remainder of 2022:

November	5		Issue an additional 100,000 shares of common stock for $10 per share.
November	16		Purchase 10,000 shares of its own common stock (i.e., treasury stock) for $15 per share.
November	24		Resell 4,000 shares of treasury stock at $16 per share.
December	1		Declare a cash dividend on its common stock of $11,400 ($0.10 per share) to all stockholders of record on December 15.
December	20		Pay the cash dividend declared on December 1.
December	31		Pay $800,000 for construction of new cabins and other facilities. The entire expenditure is recorded in the Buildings account.

Prepare the Journal entries for transactions.

Answer 1

Journal entry

Date	Account and explanation	Debit	Credit
Nov 5	Cash	1000000
	Common Stock		100000
	Paid in capital in excess of par-Common Stock		900000
Nov 16	Treasury Stock (10000*15)	150000
	Cash		150000
Nov 24	Cash (4000*16)	64000
	Treasury Stock (4000*15)		60000
	Paid in capital from sale of treasury Stock		4000
Dec 1	Cash Dividend	11400
	Dividend payable		11400
Dec 15	No Journal entry
Dec 20	Dividend payable	11400
	Cash		11400
Dec 31	Building	800000
	Cash		800000
Dec 31	Retained earnings	11400
	Cash dividend		11400