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Borner Communications’ articles of incorporation authorized the issuance of 165 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, 150 million shares at $1 par $150
Paid-in capital – excess of par 450
Retained earnings 260

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:

On January 7, 2021, Borner reacquired 2 million shares at $6.50 per share.
On August 23, 2021, Borner reacquired 4 million shares at $3.00 per share.
On July 25, 2022, Borner sold 3 million common shares at $8 per share.

Respuesta :

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Answer:

1. January 07,2021

Dr Common stock $2 million

Dr Paid-in capital—excess of par

Dr Retained earnings $5 million

Cr Cash $13 million

2. August 23,2021

Dr Common stock $4million

Cr Paid-in capital—excess of par $12million

Dr Paid-in capital—share repurchase$4million

Cr Cash $12million

3. July 25, 2022

Dr Cash $24 million

Cr Common stock $3million

Cr Paid-in capital—excess of par $21 million

Explanation:

Preparation of the appropriate journal entry for each of the transaction

1. January 07,2021

Dr Common stock $2 million

(2 million shares *$1)

Dr Paid-in capital—excess of par

[2 million shares *($450/150 million shares)] $6 million

Dr Retained earnings $5 million

($13 million-$2 million-$6million)

Cr Cash $13 million

(2 million shares *$6.50 per share)

(To record 2 million shares reacquired at $6.50 per share)

2. August 23,2021

Dr Common stock $4million

(4 million shares *$1)

Cr Paid-in capital—excess of par $12million

[4 million shares *($450/150 million shares)

Dr Paid-in capital—share repurchase$4million

[($12million+$4million)-$12million)

Cr Cash $12million

(4 million shares * $3.00 per share)

(To record 4 million shares reacquired at $3.00 per share)

3. July 25, 2022

Dr Cash $24 million

(3 million common shares *$8 per share)

Cr Common stock $3million

(3 million shares *$1)

Cr Paid-in capital—excess of par $21 million

( $24 million-$3million)

(To record 3 million shares reacquired at $8.00 per share)

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