Chapter 13 Corporations: Organization, Stock Transactions, and Dividen To illustrate, assume that a corporation has the following paid-in capital on January 1: Common stock, $25 par (20,000 shares authorized and issued) $500,000 Excess of issue price over par 150,000 $650,000 On February 13, the corporation purchases 1,000 shares of its common stock at VE per share. The entry to record the purchase of the treasury stock is as follows: 13 Treasury Stock Feb. 45,000 Cash 45,000 Purchased 1,000 shares of treasury stock at $45. On April 29, the corporation sells 600 shares of the treasury stock for $60. The entry to record the sale is as follows: Apr. 29 Cash 36,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock Sold 600 shares of treasury stock at $60. 27,000 9,000 A sale of treasury stock may result in a decrease in paid-in capital. To the extent that Paid-In Capital from Sale of Treasury Stock has a credit balance, it is debited for any such decrease. Any remaining decrease is then debited to the retained earnings account. To illustrate, assume that on October 4, the corporation sells the remaining 400 shares of treasury stock for $40 per share. The entry to record the sale is as follows: 16,000 Oct. 4 Cash 2,000 Paid-In Capital from Sale of Treasury Stock Treasury Stock Sold 400 shares of treasury stock at $40. 18,000 preceding October 4 entry decreases paid-in capital by $2,000. Because Paid-In Capital from Sale of Treasury Stock has a credit balance of $9,000, the entire $2,000 as debited to Paid-In Capital from Sale of Treasury Stock. No dividends (cash or stock) are paid on the shares of treasury stock. To do so would result in the corporation earning dividend revenue from itself. Example Exercise 13-5 Entries for Treasury Stock
Chapter 13 Corporations: Organization, Stock Transactions, and Dividen To illustrate, assume that a corporation has the following paid-in capital on January 1: Common stock, $25 par (20,000 shares authorized and issued) $500,000 Excess of issue price over par 150,000 $650,000 On February 13, the corporation purchases 1,000 shares of its common stock at VE per share. The entry to record the purchase of the treasury stock is as follows: 13 Treasury Stock Feb. 45,000 Cash 45,000 Purchased 1,000 shares of treasury stock at $45. On April 29, the corporation sells 600 shares of the treasury stock for $60. The entry to record the sale is as follows: Apr. 29 Cash 36,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock Sold 600 shares of treasury stock at $60. 27,000 9,000 A sale of treasury stock may result in a decrease in paid-in capital. To the extent that Paid-In Capital from Sale of Treasury Stock has a credit balance, it is debited for any such decrease. Any remaining decrease is then debited to the retained earnings account. To illustrate, assume that on October 4, the corporation sells the remaining 400 shares of treasury stock for $40 per share. The entry to record the sale is as follows: 16,000 Oct. 4 Cash 2,000 Paid-In Capital from Sale of Treasury Stock Treasury Stock Sold 400 shares of treasury stock at $40. 18,000 preceding October 4 entry decreases paid-in capital by $2,000. Because Paid-In Capital from Sale of Treasury Stock has a credit balance of $9,000, the entire $2,000 as debited to Paid-In Capital from Sale of Treasury Stock. No dividends (cash or stock) are paid on the shares of treasury stock. To do so would result in the corporation earning dividend revenue from itself. Example Exercise 13-5 Entries for Treasury Stock
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter20: Corporations: Organization And Capital Stock
Section: Chapter Questions
Problem 9SPB: STOCK SUBSCRIPTIONS AND TREASURY STOCK Rogers Hart formed a corporation and had the following...
Related questions
Question
100%
This is an example in my textbook for
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:
9781305653535
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Accounting (Text Only)
Accounting
ISBN:
9781285743615
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning