Question

UMB Company began its business on Jan 1, 2018. During 2018, the following transactions occurred affecting stockholders’ equity (in the order given):

a) Issued common stock of 50,000 shares for $10 per share with a par value of $1 per share.

(b) Issued a 10% stock dividend when the market price was at $8 per share.

(c) Purchased treasury stocks of 1,000 shares at $6 per share.

(d) Reissue all the treasury stocks at $10 per share.

(e) Execute 2-for-1 stock splits.

1. Give the journal entry to record transaction (a).

2. Give the journal entry to record transaction (b).

3. Give the journal entry to record transaction (c).

4. Give the journal entry to record transaction (d).

5. Compute the number of shares outstanding on 12/31/2018.

Answer 1

Journal entry

No	General Journal	Debit	Credit
a	Cash (50000*10)	500000
	Common Stock		50000
	Paid in capital in excess of par value-Common Stock		450000
b	Stock dividend (50000*10%*8)	40000
	Common Stock dividend distributable		5000
	Paid in capital in excess of par value-Common Stock		35000
	Common Stock dividend distributable	5000
	Common Stock		5000
c	Treasury Stock	6000
	Cash		6000
d	Cash	10000
	Treasury Stock		6000
	Paid in capital from sale of treasury Stock		4000

e) Number of share outstanding = 50000*1.1-1000+1000*2 = 110000 Shares