Show the effects of each transaction on the accounting equation. Give the indicated journal entries for each of the transactions. What impact does the purchase of treasury stock have on dividends paid? What impact does the reissuance of treasury stock for an amount higher than the purchase price have on net income?

Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter13: Corporations: Organization, Stock Transactions, And Dividends
Section: Chapter Questions
Problem 3PA: The following selected accounts appear in the ledger of EJ Construction Inc. at the beginning of the...
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The following selected transactions occurred for Corner Corporation:

Feb. 1 Purchased 400 shares of the company’s own common stock at $20 cash per share; the stock is now held in treasury.
July 15 Issued 100 of the shares purchased on February 1 for $30 cash per share.
Sept. 1 Issued 60 more of the shares purchased on February 1 for $15 cash per share.

Required:

  1. Show the effects of each transaction on the accounting equation.

  2. Give the indicated journal entries for each of the transactions.

  3. What impact does the purchase of treasury stock have on dividends paid?

  4. What impact does the reissuance of treasury stock for an amount higher than the purchase price have on net income?

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