Question

On January 1, 2018, the stockholders’ equity section of Nance Corporation shows: Common stock ($2 par value) $1,200,000; paid-in capital in excess of par value $2,500,000; and retained earnings $1,000,000. During the year, the following treasury stock transactions occurred.

Mar. 1 Purchased 30,000 shares for cash at $22 per share.
Jul. 1 Sold 6,000 treasury shares for cash at $27 per share.
Sept. 1 Sold 5,000 treasury shares for cash at $19 per share.
Dec. 1 Sold 5,000 treasury shares for cash at $12 per share.

Prepare the journal entries.

Answer 1

Step-by-step explanation:

Date Particulars Debit Credit

Mar.1 Treasury Stock (30,000*22) 660,000

Cash 660,000

Jul.1 Cash ( 6,000*27) 162,000

Paid in Capital from Treasury Stock 30,000

Treasury Stock (6,000*22) 132,000

Sep.1 Cash (5,000*19) 95,000

Paid in Capital from Treasury Stock 15,000

Treasury Stock (5,000*22) 110,000

Dec.1 Cash (5,000*12) 60,000

Paid in Capital from Treasury Stock 50,000

Treasury Stock (5,000*22) 110,000

Note: When company sold out the Treasury Stock more than its purchase price, the Paid in Capital increases from Treasury Stock and recorded as credit. However, when company sold Treasury Stock less than its purchase price, the Paid in Capital decreases from Treasury Stock and recorded as debit.