Pomona Corporation issued 60,000 shares of $3 par value common stock at $21 per share and 9,000 shares of $30 par value, ten percent preferred stock at $85 per share. Later, the company purchased 2,000 shares of its own common stock at $23 per share.

a. Prepare the journal entries to record the share issuances and the purchase of the common shares.
b. Assume that Pomona sold 1,500 shares of the treasury stock at $30 per share. Prepare the general journal entry to record the sale of this treasury stock.
c. Assume that Pomona sold the remaining 500 shares of treasury stock at $20 per share. Prepare the journal entry to record the sale of this treasury stock.

Answer and Explanation:

Pomona Corporation

a) Journal entry

i.

Dr Cash (60000*21)1,260,000

Cr Common Stock (60000*3)180,000

Cr Paid in capital in excess of par value-Common Stock 1080000

ii.

Dr Cash (9000*85)765,000

Cr Preferred stock (9000*30) 270,000

Cr Paid in capital in excess of par value-Preferred 495,000

iii

Dr Treasury stock (2000*23)46000

Cr Cash 46000

b) Journal entry

Dr Cash (1500*30)45,000

Cr Paid in capital from sale of treasury

stock 10,500

Cr Treasury stock (1500*23)34,500

c) Journal entry

Dr Cash (500*20)10,000

Dr Paid in capital from sale of treasury stock1,500

Cr Treasury stock (500*23)11,500

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