BUSINESS AND FINANCE

Exercise 13-8

Rinehart Corporation purchased from its stockholders 5,700 shares of its own previously issued stock for $279,300. It later resold 1,900 shares for $52 per share, then 1,900 more shares for $47 per share, and finally 1,900 shares for $41 per share.

 

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

 

To record purchase from stockholders

Account titles and explanation Debt Credit
Treasury Stock 279,300  
Cash   279,300

 

 

To record sales of shares at $52 per share

Account titles and explanation Debt Credit
Cash 98,800  
Treasury Stock   93,100
Paid-in Capital from Treasury Stock   5,700

Cash = 1,900 x 52 = 98,800

Treasury Stock = 1,900 x 49 = 93,100

 

To record sales of shares at $47 per share

Account titles and explanation Debt Credit
Cash 89,300  
Paid-in Capital from Treasury Stock 3,800  
Treasury Stock   93,100

Cash = 1,900 x $47= 89,300

Treasury Stock = 1,900 x 49 = 93,100

 

 

To record sales of shares at $41 per share

Account titles and explanation Debt Credit
Retained Earnings 13,300  
Paid-in Capital from Treasury Stock 1,900  
Cash 77,900  
Treasury Stock   93,100

 

Cash = 1,900 x $41=77,900

Paid-in Capital from Treasury Stock = 5,700 – $3,800 = 1,900

Treasury Stock = 1,900 x 49 = 93,100

 

 

Problem 13-2A

Fechter Corporation had the following stockholders’ equity accounts on January 1, 2014: Common Stock ($4 par) $405,680, Paid-in Capital in Excess of Par Common Stock $178,180, and Retained Earnings $101,940. In 2014, the company had the following treasury stock transactions.

 

Mar. 1 Purchased 6,570 shares at $9 per share

June 1 Sold 1,480 shares at $13 per share.

Sept. 1 Sold 1,590 shares at $11 per share.

Dec. 1 Sold 1,240 shares at $6 per share.

 

Fechter Corporation uses the cost method of accounting for treasury stock. In 2014, the company reported net income of $29,080.

 

A) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2014, for net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.

 

Mar. 1

Account titles and explanation Debt Credit
Treasury Stock 59130  
Cash   59130

Treasury Stock = 6,570 x 9 = 59130

 

June 1

Account titles and explanation Debt Credit
Cash 19,240  
Treasury Stock   13,320
 

Paid-in Capital from Treasury Stock

   

5920

Cash = 1,480 x 13= 19,240

Treasury Stock = 1,480 x 9 = 13,320

Paid-in Capital from Treasury Stock = 1,480 x 4(13-9) = 5920

 

Sept. 1

Account titles and explanation Debt Credit
Cash 17,490  
Treasury Stock   14,310
 

Paid-in Capital from Treasury Stock

   

3,180

Cash = 1,590 x 11 = 17,490

Treasury Stock = 1,590 x 9 = 14,310

Paid-in Capital from Treasury Stock = 1,590 x 2(11-9) = 3,180

 

Dec. 1

Account titles and explanation Debt Credit
Cash 7,440  
Paid-in Capital from Treasury Stock 3720  
Treasury Stock   11,160

Cash = 1,240 x 6 = 7,440

Paid-in Capital from Treasury Stock = 1,240 x 3 (9-6) = 3,720

Treasury Stock = 1,240 x 9 = 11,160

 

 

 

Dec. 31

Account titles and explanation Debt Credit
Income Summary 29,080  
Retained Earnings   29,080

 

B) Open accounts for Paid-in Capital from Treasury Stock, Treasury Stock, and Retained Earnings. Post to these accounts using J10 as the posting reference. (Post entries in the order of journal entries presented in the previous part.)

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