Question

Flounder Company had the following stockholders’ equity as of January 1, 2020. Common stock, $5 par value, 20,700 shares issued $103,500 Paid-in capital in excess of par—common stock 299,000 Retained earnings 323,000 Total stockholders’ equity $725,500 During 2020, the following transactions occurred. Feb. 1 Flounder repurchased 2,000 shares of treasury stock at a price of $19 per share. Mar. 1 870 shares of treasury stock repurchased above were reissued at $17 per share. Mar. 18 530 shares of treasury stock repurchased above were reissued at $13 per share. Apr. 22 510 shares of treasury stock repurchased above were reissued at $21 per share.

Prepare the journal entries to record the treasury stock transactions in 2020, assuming Flounder uses the cost method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer and Explanation:

Date Account Title and Explanation Debit Credit

Feb 1 Treasury Stock (2000*$19) $38,000

Cash (2000*$19) $38,000

(Repurchased 2,000 treasury stock @ $19 per)

Mar 1 Cash (870*$17) $14,790

Retained Earning {870*($19-$17)} $1,740

Treasury Stock(870*$19) $16,530

(Reissued 870 out of 2000 treasury stock @ $17 per)

Mar 18 Cash (530*$13) $6,890

Retained Earning {530*($19-$13)} $3,180

Treasury Stock(530*$19) $10,070

(Reissued 530 out of 2000 treasury stock @ $13 per)

Apr 22 Cash (510*$21) $10,710

Treasury Stock(510*$19) $9,690

Paid in Capital from Treasury Stock{510*($21-$19)} $1,020

(Reissued 510 out of 2000 treasury stock @ $17 per)

NOTE : loss of sale should be charges from Retained Earning.