Question
a) Company purchases treasury stock to enhance the value of EPS (Earnings per Share) . Do you agree with the statement? Explain with proper example.
a) Company purchases treasury stock to enhance the value of EPS (Earnings per Share) . Do you agree with the statement? Explain with proper example. (2)
b) The Ahuza Corporation is authorized to issue 10,000 shares of 8%, $100 par value preferred stock, and 1,000,000 shares of no-par common stock with a stated value of $5 per share. During 2020, the company has the following stock transactions.
Jan 10 Issued 400,000 shares of common stock for cash at $8 per share.
Mar 1 Issued 5,000 shares of preferred stock for cash at $105 per share.
July 1 Issued 100,000 shares of common stock for land. The land had an asking price of $900,000. The stock is currently selling on a national exchange at $8.25 per share.
Aug 14 Issued 10,000 shares of common stock to attorneys in settlement of their bill of $50,000 for organization costs.
Sept 1 Purchased 10,000 shares of common stock for the treasury at $9 per share.
Nov 1 Sold 4,000 shares of treasury stock at $10 per share.
Dec 1 Sold 2,000 shares of treasury stock at $6per share.
Instruction: Journalize the transactions and prepare the closing entry on December 31, 2020, for net income.
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