Question

Part A
During its first year of operations, the McCollum Corporation entered into the following transactions relating to shareholders’ equity. The corporation was authorized to issue 113 million common shares, $1 par per share.

Required:
Prepare the appropriate journal entries to record each transaction.

Jan.		9		Issued 70 million common shares for $30 per share.
Mar.		11		Issued 5,300 shares in exchange for custom-made equipment. McCollum’s shares have traded recently on the stock exchange at $30 per share.

Part B
A new staff accountant for the McCollum Corporation recorded the following journal entries during the second year of operations. McCollum retires shares that it reacquires (restores their status to that of authorized but unissued shares).

		($ in millions)
Date	General Journal	Debit	Credit
Sept. 1	Common stock	4
	Retained earnings	136
	Cash		140
Dec. 1	Cash	72
	Common stock		2
	Gain on sale of previously issued shares		70

Required:
Prepare the journal entries that should have been recorded for each of the transactions.

Answer 1