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Chapter 13: Q6SE_1 (page 708)

Accounting for the purchase and sale of treasury stock

Discount Furniture, Inc. completed the following treasury stock transactions in 2018:

Dec. 1 Purchased 1,900 shares of the company鈥檚 \(1 par value common stock as treasury stock, paying cash of \)5 per share.

15 Sold 200 shares of the treasury stock for cash of \(8 per share.

20 Sold 1,000 shares of the treasury stock for cash of \)1 per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on December 20 is $2,400.)

Requirements

1. Journalize these transactions. Explanations are not required.

Short Answer

Expert verified

On dec 1- Treasury stock- common will be debited and cash will be credited with $11,200

On dec 15- Cash will be debited $2,000; Treasury stock- common $1,400 and Paid-In Capital from Treasury Stock $900 will be credited

On dec 20- Cash $2,100, Paid-In Capital from Treasury Stock $2,100, and Retained Earnings $700 will be debited and Treasury Stock-Common $4,900 will be credited

Step by step solution

01

Basic Introduction-

Working note:

Treasury Stock - Common $11,200($ 7 per share x 1 comma 600 shares)

Cash $2,000($ 10 per share x 200 shares)

Treasury Stock-Common $1,400($ 7 per share x 200 shares)

Paid-In Capital from Treasury Stock $600 (($ 10 dash $ 7) per share x 200 shares)

Cash $2,100($ 3 per share x 700 shares)

Paid-In Capital from Treasury Stock$2,100($ 3 per share x 700 shares)

Retained Earnings $700 ($4900- $ 2100- $2100)

Treasury Stock-Common $4,900 ($ 7 per share x 700 shares)

02

Journals-

Date

Transaction

Debit

Credit

Dec. 1

Treasury Stock - Common

$11,200

Cash

$11,200

Dec. 15

Cash

$2,000

Treasury Stock鈥擟ommon

$1,400

Paid-In Capital from Treasury Stock

$600

Dec. 20

Cash

$2,100

Paid-In Capital from Treasury Stock

$2,100

Retained Earnings

$700

Treasury Stock-Common

$4,900

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Most popular questions from this chapter

Where and how is treasury stock reported on the balance sheet?

What is treasury stock? What type of account is Treasury Stock, and what is the account鈥檚 normal balance?

Journalizing treasury stock transactions and reporting stockholders鈥� equity

Southern Amusements Corporation had the following stockholders鈥� equity on

November 30:

Paid-In Capital:

Common Stock鈥擻(5 Par Value; 1,300 sharesauthorized, 250 shares issued and outstanding1,250

Retained Earnings50,000

Total Stockholders鈥� Equity \) 55,000

Stockholders鈥� Equity

Paid-In Capital in Excess of Par鈥擟ommon 3,750

Total Paid-In Capital

\(5,000

On December 30, Southern purchased 200 shares of treasury stock at \)15 per share.

Requirements

1. Journalize the purchase of the treasury stock.

Journalizing stock issuance and cash dividends and preparing the stockholders鈥� equity section of the balance sheet

C-Mobile Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes C-Mobile to issue 120,000 shares of 9%, \(150 par value cumulative preferred stock, and 140,000 shares of \)3 par value common stock. During the first month, C-Mobile completed the following transactions:

Oct. 2 Issued 18,000 shares of common stock for a building with a market value of \(260,000.

6 Issued 650 shares of preferred stock for \)160 per share.

9 Issued 14,000 shares of common stock for cash of \(84,000.

10 Declared a \)13,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock.

25 Paid the cash dividend.

Requirements

1. Record the transactions in the general journal.

2. Prepare the stockholders鈥� equity section of C-Mobile鈥檚 balance sheet at October 31, 2018. Assume C-Mobile鈥檚 net income for the month was $95,000.

What does the statement of retained earnings report?
See all solutions

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