Question

alex corporation reports the following components of stockholders equity at december 31 of the prior year.
common stock—$25 par value, 60,000 shares authorized; 39,000 shares issued and outstanding \t$ 975,000
paid - in capital in excess of par value, common stock \t70,000
retained earnings \t371,000
total stockholders equity \t$ 1,424,000
during the current year, the following transactions affected its stockholders equity accounts.
january 2 \tpurchased 3,900 shares of its own stock at $25 cash per share.
january 7 \tdirectors declared a $1.50 per share cash dividend payable on february 28 to the february 9 stockholders of record.
february 28 \tpaid the dividend declared on january 7.
july 9 \tsold 1,500 of its treasury shares at $30 cash per share.
august 27 \tsold 1,950 of its treasury shares at $21 cash per share.
september 9 \tdirectors declared a $2 per share cash dividend payable on october 22 to the september 23 stockholders of record.
october 22 \tpaid the dividend declared on september 9.
december 31 \tclosed the $61,000 credit balance (from net income) in the income summary account to retained earnings.
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prepare journal entries to record each of these transactions.
view transaction list
journal entry worksheet
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record the purchase of 3,900 shares of its own common stock for $25 cash per share.
note: enter debits before credits.
date \tgeneral journal \tdebit \tcredit

Explanation:

Step1: Identify the account for treasury stock

When a company purchases its own common stock, it debits the Treasury Stock account. The cost of the purchase is calculated by multiplying the number of shares by the price per share. Here, number of shares is 3,900 and price per share is $25. So, the amount is \( 3900 \times 25 = 97500 \).

Step2: Identify the cash account

Since cash is paid for the purchase, the Cash account is credited with the same amount as the debit to Treasury Stock.

Journal Entry:

Date	General Journal	Debit	Credit
	Cash		97,500

(Note: The date is January 2 as per the transaction. The debit to Treasury Stock and credit to Cash are for the amount calculated as \( 3900 \times 25 = 97500 \))

Answer:

The journal entry to record the purchase of 3,900 shares of its own common stock for $25 cash per share is:

• Debit Treasury Stock for $97,500
• Credit Cash for $97,500

with the date as January 2.