Question

On April 2 a corporation purchased for cash 6,000 shares of its own $13 par common stock at $26 per share. It sold 4,000 of the treasury shares at $29 per share on June 10. The remaining 2000 shares were sold on November 10 for $22 per share.

a. Journalize the entries to record the purchase (treasury stock is recorded at cost). Apr. 2
b. Journalize the entries to record the sale of the stock. If an amount box does not require an entry, leave it

Answer 1

The journal entries for the purchase and sale of treasury stock involve debiting the Treasury Stock account for the purchase, and crediting cash. For the sales, cash is debited and the Treasury Stock is credited. Any surplus or deficit from the cost is adjusted in the Paid-in Capital from Treasury Stock account.

Step-by-step explanation:

Journal Entries for Treasury Stock Transactions

To address the scenario of the corporation purchasing and then selling its own treasury stock, we'll need to journalize two types of entries: the initial purchase and the subsequent sales. Below are the steps illustrating how to record these transactions using the provided information.

a. Journalize the Entries to Record the Purchase

April 2nd Entry:

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• Debit Treasury Stock for $156,000 (6,000 shares × $26 per share).
• 
  
• Credit Cash for $156,000.

b. Journalize the Entries to Record the Sale of the Stock

June 10th Entry:

• 
  
• Debit Cash for $116,000 (4,000 shares × $29 per share).
• 
  
• Credit Treasury Stock for $104,000 (4,000 shares × $26 per share).
• 
  
• Credit Paid-in Capital from Treasury Stock for $12,000 (the difference between the cash received and the cost of the treasury stock).

November 10th Entry:

• 
  
• Debit Cash for $44,000 (2,000 shares × $22 per share).
• 
  
• Credit Treasury Stock for $52,000 (2,000 shares × $26 per share).
• 
  
• Debit Paid-in Capital from Treasury Stock for $8,000 or other accounts if needed (this reflects the loss on the sale of the treasury stock).

Answer 2

Step-by-step explanation:

The journal entries are shown below:

a. Treasury stock A/c Dr $156,000 (6,000 shares × $26)

To Cash A/c $156,000

(Being the purchase of treasury stock is recorded)

b. Cash A/c Dr $116,000 (4,000 shares × $29)

To Treasury Stock A/c $10,4000 (4,000 shares × $26)

To Paid in capital - Treasury stock $12,000

(Being treasury stock is sold at higher price and the remaining amount would be credited to the paid in capital account)

c. Cash A/c Dr $44,000 (2,000 shares × $22)

Paid in capital - Treasury stock $8,000

To Treasury Stock A/c $52,000 (2,000 shares × $26)

(Being treasury stock is sold at lower price)