# Entries for treasury stock On May 27, Hydro Clothing Inc. reacquired 75,000 shares of its common stock at $8 per share. On August 3, Hydro Clothing sold 54,000 of the reacquired shares at$11 per share. On November 14, Hydro Clothing sold the remaining shares at $7 per share. Journalize the transactions of May 27, August 3, and November 14. BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 BuyFind ### Accounting 27th Edition WARREN + 5 others Publisher: Cengage Learning, ISBN: 9781337272094 #### Solutions Chapter Section Chapter 13, Problem 13.5BPE Textbook Problem ## Entries for treasury stockOn May 27, Hydro Clothing Inc. reacquired 75,000 shares of its common stock at$8 per share. On August 3, Hydro Clothing sold 54,000 of the reacquired shares at $11 per share. On November 14, Hydro Clothing sold the remaining shares at$7 per share.Journalize the transactions of May 27, August 3, and November 14.

Expert Solution
To determine

Treasury Stock: It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.

To journalize: The transactions of May 27, August 3, and November 14.

### Explanation of Solution

Record the purchase of 75,000 shares of its own stock at $8 per share.  Date Account Titles and Explanation Debit ($) Credit ($) May 27 Treasury Stock (75,000 shares ×$8 per share) 600,000 Cash 600,000 (To record purchase of treasury stock)

Table (1)

• Treasury stock is contra-stockholders’ equity account with a normal debit balance. Thus, when treasury stocks are purchased, it decreases the stockholders’ equity account. In this case, it reduces the stockholders’ equity by $600,000. Therefore, treasury stock account is debited with$600,000.
• Cash is an asset. It is decreased as cash is paid for the purchase of treasury stock. Therefore, the cash account is credited with $600,000. • Treasury stock does not affect the net income, as the net income would be affected by change in revenues and expenses. Record the resale of 54,000 shares of treasury stock for cash at$11 per share.

 Date Account Titles and Explanation Debit ($) Credit ($) August 3 Cash (54,000 shares × $11 per share) 594,000 Treasury stock (54,000 shares ×$8 per share) 432,000 Paid-in capital from treasury stock (594,000−\$432,000) 162,000 (To record sale of treasury stock for above the cost price)

Table (2)

• Cash is an asset

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