Reference no: EM132972110
TraWell, Inc., reported the following shareholder's equity on January 1, 2020:
Common shares - 600,000 no par value, issued and outstanding $4,788,000
Contributed surplus - share repurchase 28,000
Retained earnings 6,200
Problem 1: On March 1, 2020, the company issued an additional 46,000 common shares at $9.00 each. Thereafter on July 1, 2020, it issued an additional 34,000 common shares to call option holders. The strike price was $8.20 each and the market value was $9.10 each. On October 1, 2020, it bought back 100,000 common shares at $9.20 each and cancelled them. The appropriate journal entry to record the transaction on October 1 would be:
Option a. No journal entry is required for this transaction as the shares have been cancelled.
Option b. DEBIT-Common Shares [$800,000]; DEBIT-Contributed Surplus - Share Repurchase [$28,000]; DEBIT-Loss on Share Repurchase [$102,000]; CREDIT-Cash [$920,000].
Option c. DEBIT-Common Shares [$800,000]; DEBIT-Contributed Surplus - Share Repurchase [$28,000]; DEBIT-Loss on Share Repurchase [$20,000]; DEBIT-Retained Earnings [$82,000]; CREDIT-Cash [$920,000].
Option d. DEBIT-Common Shares [$920,000]; CREDIT-Cash [$920,000].
Option e. DEBIT-Common Shares [$806,000]; DEBIT-Contributed Surplus - Share Repurchase [$28,000]; DEBIT-Retained Earnings [$86,000]; CREDIT-Cash [$920,000].
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