Question

In 2024, Poe's Products completed the treasury stock transactions described below.

January 2: Reacquired 10 million shares at $17.00 per share.
February 15: Sold 3 million treasury shares at $20.50 per share.
September 20: Sold 3 million treasury shares at $15.50 per share.

Poe had issued 50 million shares of its $1 par common stock for $18 several years ago.

Record the above transactions assuming that Poe's Products uses the cost method.

Answer 1

In 2024, Poe's Products completed three treasury stock transactions under the cost method. The transactions involved reacquiring and selling shares at different prices. The effect on the company's accounts and additional paid-in capital can be determined by recording these transactions.

Step-by-step explanation:

Poe's Products completed three treasury stock transactions in 2024. On January 2, they reacquired 10 million shares at $17.00 per share. On February 15, they sold 3 million treasury shares at $20.50 per share, and on September 20, they sold another 3 million treasury shares at $15.50 per share. Assuming Poe's Products follows the cost method for accounting, let's record these transactions:

1. Poe's Products reacquired 10 million shares at a cost of $17.00 per share. This reduces the common stock and additional paid-in capital accounts.
2. Poe's Products sold 3 million treasury shares at $20.50 per share. This increases cash and reduces the treasury stock account. The difference between the selling price and cost per share is recorded as additional paid-in capital.
3. Poe's Products sold another 3 million treasury shares at $15.50 per share. Similar to the previous sale, this increases cash and reduces the treasury stock account. The difference between the selling price and cost per share is recorded as a reduction in additional paid-in capital.