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Borner Communications’ articles of incorporation authorized the issuance of 130 million common shares
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Borner Communications’ articles of incorporation authorized the issuance of 130 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, 115 million shares at $1 par | $ | 115 | |
| Paid-in capital—excess of par | 345 | ||
| Retained earnings | 225 | ||
| 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:(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) |
| 1. | On January 7, 2016, Borner reacquired 2 million shares at $6.50 per share. |
| 2. | On August 23, 2016, Borner reacquired 4 million shares at $3.00 per share. |
| 3. | On July 25, 2017, Borner sold 3 million common shares at $8 per share.
Record the reacquisition of 2 million shares by Borner. Record the reacquisition of 4 million shares by Borner. Record the sale of 3 million common shares. |
Expert Solution
Solution:
Preparing Journal Entries for each Transaction in Borner Communications:
1) On January 7, 2016, Borner reacquired 2 million shares at $6.50 per share.
| Date | General journal | Debit | Credit |
| Jan 7, 2016 | Common stock (2 million shares x $1 par) | $2 | |
| Paid-in capital—excess of par (2 million shares x $3*) | $6 | ||
| Retained earnings (difference) | $5 | ||
| Cash (2 million shares x $6.50 per share) | $13 | ||
| (To record the reacquisition of 2 million shares by Borner) |
* Paid-in capital—excess of par: $345/115 million shares = $3
2) On August 23, 2016, Borner reacquired 4 million shares at $3.00 per share.
| Date | General journal | Debit | Credit |
| Aug 23, 2016 | Common stock (4 million shares x $1 par) | $4 | |
| Paid-in capital—excess of par (4 million shares x $3) | $12 | ||
| Paid-in capital—share repurchase (difference) | $4 | ||
| Cash (4 million shares x $3.00 per share) | $12 | ||
| (To record the reacquisition of 4 million shares by Borner) |
3) On July 25, 2017, Borner sold 3 million common shares at $8 per share.
| Date | General journal | Debit | Credit |
| July 25, 2017 | Cash (3 million shares x $8 per share) | $24 | |
| Common stock (3 million shares x $1 par) | $3 | ||
| Paid-in capital—excess of par (difference) | $21 | ||
| (To record the Sale of 3 million Common Shares) |
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