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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 15, Problem 15E
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 22GI
Problem 23GI
Problem 24GI
Problem 25GI
Problem 26GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 12RE
Problem 13RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 12P
Problem 13P
Problem 14P
Problem 15P
Problem 16P
Problem 17P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 8C
Problem 9C
Problem 10C
Problem 11C
Problem 12C
Problem 13C
Problem 14C
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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Treasury Stock, Cost Method On January 1, Lorain Corporation had 2,000 shares of $5 par common stock authorized and outstanding. These shares were originally issued at a price of $26 per share. In addition, 500 shares of $50 par preferred stock were outstanding. These were issued at a price of $75 per sl1are. During the year, the following stock transactions occurred:

  1. 1. March 3: Lorain reacquired 100 shares of its own common stock at a cost of $24 per share.
  2. 2. April 27: It sold 25 shares of the common stock acquired on March 3 for $33 per share.
  3. 3. July 10: It sold 25 shares of the common stock acquired on March 3 for $22 per share.
  4. 4. October 12: It retired the remaining shares acquired on March 3.

Required:

Prepare journal entries to record the treasury stock transactions of Lorain, assuming it uses the cost method.

To determine

Prepare the journal entries to record the treasury stock transactions of Corporation L under cost method.

Explanation

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.

Cost method: Under this method, at the time of reacquiring the treasury stock, it will be debited for the amount paid. At the time of reissuance, treasury stock will be credited and cash will be debited with the proceeds received. Credit the additional paid-in capital for the difference amount.

Retired stock: The shares of a corporation which are formally bought back from the shareholders for cash obtain the status of ‘authorized but unissued shares’.  Such shares are referred to as retired stock.

Prepare the journal entries to record the treasury stock transactions of Corporation L under cost method:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
March 03Treasury Stock ($24 × 100) 2,400 
    Cash  2,400
 (To record purchase of treasury stock)   
     
April 27Cash ($33 × 25) 825 
    Treasury Stock ($24 × 25)  600
     Additional Paid-in Capital from Treasury     Stock  225
 (To record sale of treasury stock)   
July 10Cash ($22 × 25) 550 
Additional Paid-in Capital from Treasury Stock 50 
     Treasury Stock ($24 × 25)  600
 (To record sale of treasury stock)   
October 12Common Stock ($5 × 50

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Ch-15 P-1GICh-15 P-2GICh-15 P-3GICh-15 P-4GICh-15 P-5GICh-15 P-6GICh-15 P-7GICh-15 P-8GICh-15 P-9GICh-15 P-10GI
Ch-15 P-11GICh-15 P-12GICh-15 P-13GICh-15 P-14GICh-15 P-15GICh-15 P-16GICh-15 P-17GICh-15 P-18GICh-15 P-19GICh-15 P-20GICh-15 P-21GICh-15 P-22GICh-15 P-23GICh-15 P-24GICh-15 P-25GICh-15 P-26GICh-15 P-1MCCh-15 P-2MCCh-15 P-3MCCh-15 P-4MCCh-15 P-5MCCh-15 P-6MCCh-15 P-7MCCh-15 P-8MCCh-15 P-9MCCh-15 P-10MCCh-15 P-1RECh-15 P-2RECh-15 P-3RECh-15 P-4RECh-15 P-5RECh-15 P-6RECh-15 P-7RECh-15 P-8RECh-15 P-9RECh-15 P-10RECh-15 P-11RECh-15 P-12RECh-15 P-13RECh-15 P-1ECh-15 P-2ECh-15 P-3ECh-15 P-4ECh-15 P-5ECh-15 P-6ECh-15 P-7ECh-15 P-8ECh-15 P-9ECh-15 P-10ECh-15 P-11ECh-15 P-12ECh-15 P-13ECh-15 P-14ECh-15 P-15ECh-15 P-16ECh-15 P-17ECh-15 P-18ECh-15 P-19ECh-15 P-1PCh-15 P-2PCh-15 P-3PCh-15 P-4PCh-15 P-5PCh-15 P-6PCh-15 P-7PCh-15 P-8PCh-15 P-9PCh-15 P-10PCh-15 P-11PCh-15 P-12PCh-15 P-13PCh-15 P-14PCh-15 P-15PCh-15 P-16PCh-15 P-17PCh-15 P-1CCh-15 P-2CCh-15 P-3CCh-15 P-4CCh-15 P-5CCh-15 P-6CCh-15 P-7CCh-15 P-8CCh-15 P-9CCh-15 P-10CCh-15 P-11CCh-15 P-12CCh-15 P-13CCh-15 P-14C

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