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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Treasury Stock, Cost and Par Value Methods On January 1, West Company had outstanding 10,000 shares of $10 par common stock, which had been originally issued at an average price of $35 per share. During the year, West engaged in the following treasury stock transactions:

  1. 1. Reacquired 1,000 shares of its common stock for $33 per share.
  2. 2. Reissued 600 shares of the treasury stock for $35 per share.
  3. 3. Reissued 300 shares of the treasury stock for $32 per share.
  4. 4. Retired the remaining 100 shares of treasury stock.

Required:

Prepare journal entries to record the preceding treasury stock transactions for West assuming it uses (1) the cost method and (2) the par value method.

1.

To determine

Prepare journal entries to record the given transactions by using cost method.

Explanation

Treasury Stock: The shares of a corporation which are bought back from the shareholders for cash but are not formally retired are referred to as treasury stock.

Prepare journal entries to record the given transactions under Cost method:

Account Titles and ExplanationPost Ref.Debit ($)Credit ($)
Treasury Stock ($33×1,000) $33,000 
     Cash  $33,000
(To record reacquisition of common stock)   
    
Cash ($35×600) $21,000 
     Treasury Stock: Common ($33×600)  $19,800
    Additional paid in capital from treasury      stock  $1,200
(To record reissue of treasury stock)   
    
Cash ($32×300) $9,600 
Additional paid in capital from treasury stock $300 
    Treasury Stock: Common ($33×300)  $9,900
(To record reissue of treasury stock)   
    
Common stock ($10×100) $1,000 
Additional paid in capital on common stock (($35

2.

To determine

Prepare journal entries to record the given transactions by using Par value method.

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