Question 1

Presented below is information related to Tahir Cements Company Ltd.

1. The company is granted a charter that authorizes issuance of 40,000 shares of $ 10 par value preferred stock and 40,000 shares of no-par common stock.

2. 30,000 shares of common stock are issued to the founders of the corporation for Buildings valued by the board of directors at $ 800,000. The board establishes a stated value of $ 10 a share for the common stock.

3. 20,000 shares of preferred stock are sold for cash at $ 120 per share. ($ 100 par value)

4. The company issues 500 shares of common stock to its attorneys for costs associated with starting the company. At that time, the common stock was selling at $ 12 per share.

Instructions

(a) Prepare the general journal entries necessary to record these transactions. (12 marks)

(b) Explain the meaning of Restricted Stock. State its advantages (8 marks)

(c) Explain the reasons for which a company would buy its own stock