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Chapter 15: Question 8BE (page 811)

Sprinkle Inc. has outstanding 10,000 shares of \(10 par value common stock. On July 1, 2017, Sprinkle reacquired 100 shares at \)87 per share. On September 1, Sprinkle reissued 60 shares at \(90 per share. On November 1, Sprinkle reissued 40 shares at \)83 per share. Prepare Sprinkle鈥檚 journal entries to record these transactions using the cost method.

Short Answer

Expert verified

In Sprinkle Inc.鈥檚 book, the treasury stock should be credited with $3,480.

Step by step solution

01

Meaning of Per Share Price

The term price per share refers to the value of a single share asked by a company to sell shares to its potential investor to collect finance.

02

Preparing Sprinkle’s journal entries using the cost method

Date

Particular

Folio

Debit USD

$

Credit USD

$

01-07-2017

Treasury Stock (100$87) A/c Dr.

8,700

To Cash A/c Cr.

8,700

(being treasury stock issue)

01-09-2017

Cash A/c (60$90) Dr.

5,400

To Treasury Stock (60$87) A/c Cr.

5,220

To paid-in capital from Cr.

Treasury Stock A/c

180

(being treasury stock credited)

01-11-2017

Cash A/c (40$83) Dr.

3,320

Paid-in capital from Dr.

Treasury Stock A/c

160

To Treasury Stocks (40$87) Cr.

3,480

(being treasury stock transferred)

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Most popular questions from this chapter

Graves Mining Company declared, on April 20, a dividend of \(500,000 payable on June 1. Of this amount, \)125,000 is a return of capital. Prepare the April 20 and June 1 entries for Graves.

Arantxa Corporation has outstanding 20,000 shares of \(5 par value common stock. On August 1, 2017, Arantxa reacquired 200 shares at \)80 per share. On November 1, Arantxa reissued the 200 shares at $70 per share. Arantxa had no previous treasury stock transactions. Prepare Arantxa鈥檚 journal entries to record these transactions using the cost method.

(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders鈥� equity as of January 1, 2017

Common stock, \(5 par value, 20,000 shares issued \)100,000

Paid-in capital in excess of par鈥攃ommon stock 300,000

Retained earnings 320,000

Total stockholders鈥� equity \(720,000

During 2017, the following transactions occurred.

Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19

per share.

Mar.1 800 shares of treasury stock repurchased above were reissued at \(17

per share.

Mar.18 500 shares of treasury stock repurchased above were reissued at \)14

per share.

Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20

per share.

Instructions

  1. Prepare the journal entries to record the treasury stock transactions in 2017, assuming Clemson uses the cost method.
  2. Prepare the stockholders鈥� equity section as of April 30, 2017. Net income for the first 4 months of 2017 was \)130,000.

Satchel Inc. purchases 10,000 shares of its own previously issued \(10 par common stock for \)290,000. Assuming the shares are held in the treasury with intent to reissue, what effect does this transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total stockholders鈥� equity?

Wilco Corporation has the following account balances on December 31, 2017.

Share capital鈥攐rdinary, \(5 par value \) 510,000

Treasury shares 90,000

Retained earnings 2,340,000

Share premium鈥攐rdinary 1,320,000

Instructions

Prepare Wilco鈥檚 December 31, 2017, equity section.
See all solutions

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