Question

On April 2 a corporation purchased for cash 7,000 shares of its own $10 par common stock at $28 a share. It sold 4,000 of the treasury shares at $31 a share on June 10. The remaining 3,000 shares were sold on November 10 for $24 a share.

Required:
a. Journalize the entries to record the purchase (treasury stock is recorded at cost).
b. Journalize the entries to record the sale of the stock.

Answer 1

Answer;

a.

April 2,

DR Treasury Stock ................................................$196,000

CR Cash....................................................................................$196,000

(To record purchase of Treasury Stock)

Working

= 7,000 * $28

= $196,000

b.

June 10

DR Cash ...............................................................................$124,000

CR Treasury Stock...............................................................................$112,000

CR Paid in Capital Treasury Stock ..................................................$12,000

Working

Cash = 31 * 4,000 = $124,000

Treasury stock ( recorded at cost) = 28 * 4,000 = $112,000

Pain in Cap = 124,000 - 112,000 = $12,000

Nov 10,

DR Cash ...................................................................................$72,000

DR Paid in Capital Treasury Stock......................................$12,000

CR Treasury Stock..................................................................................$84,000

Working

Cash = 3,000 * 24 = $72,000

Treasury Cap = 3,000 * 28 = $84,000

Paid in Cap = 84,000 - 72,000 = $12,000