Question

On May 1, Southern Oil Corporation purchased 2,000 shares of its $10 par value common stock at a cash price of $13/share. On July 15, 900 shares of the treasury stock were sold for cash at $17/share. Journalize the two transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Answer 1

1.

May 1,

DR Treasury Stock $ 26,000

CR Cash $26,000

(To record purchase of Treasury Stock)

Working - 2,000 * $13 per share

= $26,000

2.

July 15,

DR Cash $ $15,300

CR Treasury Stock $11,700

CR Additional Paid-in Capital $3,600

(To record sale of Treasury Stock)

Working and Notes

Cash = 900 * $17 per share = $15,300

Treasury Stock = 900 * purchase price of $13 per share = $11,700

When a stock is sold for more than it was bought or issued for, record this in the Additional Paid-in Capital account.

= Cash - Treasury

= 15,300 - 11,700

= $3,600