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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Treasury stock transactions
Sun Dance Gardens Inc. develops and produces spraying equipment for lawn maintenance and industrial uses. On June 3 of the current year. Sun Dance Gardens Inc. reacquired 28,000 shares of its common stock at $37 per share.
a. What is the balance of Treasury Stock on December 31 of the current year?
b. Mow will the balance in Treasury Slock be reported on the balance sheet?
c. Assume thai Sun Dance Gardens sold 10,000 shares of its treasury stock at $40 on November 2. What accounts would be affected by the sale of the treasury stock?

To determine

Concept Introduction:

Treasury stock:

Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The journal entries are made at the time of sale and purchase of treasury stock as follows:

  • For Purchase of treasury stock:

    Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.

  • For Sale / Reissuance of treasury stock:

    Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and Retained earnings accounts are adjusted.

Requirement-a:

To Indicate:

The Balance of the Treasury Stock on Dec. 31 of the current year

Explanation

The Balance of the Treasury Stock on Dec. 31 of the current year is calc...

To determine

Concept Introduction:

Treasury stock:

Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The journal entries are made at the time of sale and purchase of treasury stock as follows:

  • For Purchase of treasury stock:

    Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.

  • For Sale / Reissuance of treasury stock:

    Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and Retained earnings accounts are adjusted.

Requirement-b:

To Indicate:

The Balance of the Treasury Stock on Dec. 31 of the current year to be reported on the balance sheet

To determine

Concept Introduction:

Treasury stock:

Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The journal entries are made at the time of sale and purchase of treasury stock as follows:

  • For Purchase of treasury stock:

    Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.

  • For Sale / Reissuance of treasury stock:

    Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and Retained earnings accounts are adjusted.

Requirement-c:

To Indicate:

The reason for purchase of treasury stock

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