Question

Prepare journal entries to record the following transactions for Sherman Systems.

a. Purchased 5,000 shares of its own common stock at $25 per share on October 11.
b. Sold 1,000 treasury shares on November 1 for $31 cash per share.
c. Sold all remaining treasury shares on November 25 for $20 cash per share.

Answer 1

To prepare the journal entries for the transactions of Sherman Systems, you will need to record the purchase and sale of treasury shares. The entries should include debits and credits to the appropriate accounts.

Step-by-step explanation:

To record the transactions for Sherman Systems, you will need to create journal entries for each event. Here is how you can prepare the journal entries:

1. For the purchase of 5,000 shares of its own common stock at $25 per share on October 11:
2. Debit Treasury Stock - Common ($25,000)
3. 
   
4. Credit Cash ($125,000)
5. For the sale of 1,000 treasury shares on November 1 for $31 cash per share:
6. Debit Cash ($31,000)
7. 
   
8. Credit Treasury Stock - Common ($25,000)
9. 
   
10. Credit Additional Paid-in Capital - Treasury Stock ($6,000)
11. For the sale of all remaining treasury shares on November 25 for $20 cash per share:
12. Debit Cash ($100,000)
13. 
    
14. Credit Treasury Stock - Common ($25,000)
15. 
    
16. Credit Additional Paid-in Capital - Treasury Stock ($75,000)

Answer 2

The journal entries required for the redemption as well as the two instances of stock sale is given in details below:

Step-by-step explanation:

DR CR

11-Oct Treasury stock 5000shares @$5 each 25000

Cash 25000

Being own shares repurchased

1-Nov Cash 31000

Treasury stock 1000 shares issued @$31 each 25000

Paid-in-capital treasury stock 6000

Reissuing treasury stock a higher price

25-Nov Cash 80000

Paid-in-capital treasury stock 6000

Retained earnings 14000

Treasury stock 100000

Reissuing treasury stock at a lower price