Final answer:
The student's question involves preparing journal entries for Agler Corporation's treasury stock transactions under the cost method. These include purchasing treasury stock, selling it at a price above cost, and selling at a price below cost. The accounting treatment varies based on the selling price relation to the cost.
Step-by-step explanation:
The student is asking about journal entries for treasury stock transactions under the cost method. Here are the entries for Agler Corporation's transactions:
- Treasury Stock Purchase: Dr. Treasury Stock $9,600 (160 shares × $60); Cr. Cash $9,600.
- Treasury Stock Sale at $65 per share (above cost): Dr. Cash $7,800 (120 shares × $65); Cr. Treasury Stock $7,200 (120 shares × $60); Cr. Paid-in Capital from Treasury Stock $600 (Difference between sale price and cost).
- Treasury Stock Sale at $50 per share (below cost): Dr. Cash $2,000 (40 shares × $50); Dr. Paid-in Capital from Treasury Stock $400 (To the extent available); Dr. Retained Earnings $200 (remaining difference); Cr. Treasury Stock $2,600 (40 shares × $65).
It's important to note that the Paid-in Capital from Treasury Stock account is used only when the treasury shares are sold above cost, and any surplus after covering the original cost is credited to that account. However, if the shares are sold below cost and there's not enough balance in the Paid-in Capital from Treasury Stock, then the remaining loss is charged to Retained Earnings.