Question 2: 15% points:
Bravo Co.’s stockholders’ equity account balances at December 31, year 5, were as follows:
The following 2016 transactions and other information relate to the stockholders’ equity accounts:
> Bravo had 400,000 authorized shares of $5 par common stock, of which 160,000 shares were issued and outstanding.
> On March 5, 2016, Bravo acquired 5,000 shares of its common stock for $10 per share to hold as treasury stock.
> The shares were originally issued at $15 per share. Bravo uses the cost method to account for treasury stock. Treasury stock is permitted in Bravo’s state of incorporation.
> On July 15, 2016, Bravo declared and distributed a property dividend of inventory. The inventory had a $75,000 carrying value and a $60,000 fair market value.
> On January 2, 2011, Bravo granted stock options to employees to purchase 20,000 shares of Bravo’s common stock at $18 per share, which was the market price on that date. The options may be exercised within a three-year period beginning January 2, 2016. The measurement date is the same as the grant date. On October 1, 2016, employees exercised all 20,000 options when the market value of the stock was $25 per share. Bravo issued new shares to settle the transaction. The stock options were accounted for in accordance with the intrinsic value method, which was in effect at the time.
> Bravo’s net income for 2016 was $240,000.
Prepare journal entries for the following transactions in 2016.
Treasury stock purchased on March 5, 2016
Declaration and distribution of a property dividend on July 15, 2016
Issue of common stock on October 1, 2016
the above entry does not need an explanation.