Blackboard Remaining Time: 1 hour, 47 minutes, 37 seconds. Path: p QUESTION 12 O
ID: 2393277 • Letter: B
Question
Blackboard Remaining Time: 1 hour, 47 minutes, 37 seconds. Path: p QUESTION 12 On January 1, 2018, the stockholders in capital in excess of par value $3,000,000, and retained earnings $52,200,000. During the year, the following treasury stock transactions occurred Mar 1 Purcha July 1 Sold 12,000 treasury shares for cash at $22 per share Sept 1 Sold 10,000 treasury shares for cash at $31 per share (b) How would the treasury stock be presented on the balance sheet date January 31, 2018, the fiscal (c) How many common share were outstanding at (1) January 1, 2018, (2) December 31, 2018 For the toolbar, press ALT F10 (PC) or ALT+FN+F10 (Mac) and T T T Arial oo,vuv 300,000Explanation / Answer
a)
Journal entry for treasury stock transactions:
Sl no.
Accounts Title and Explanation
Debit
Credit
Mar 1
Treasury Stock
44000 (44000*1)
Additional paid -in capital
1056000 (44000*24)
Cash
1100000 (44000*25)
July 1
Cash
264000 (12000*22)
Treasury stock
12000 (12000*1)
Additional paid -in capital
252000 (12000*21)
Sept 1
Cash
310000 (10000*31)
Treasury stock
10000 (10000*1)
Additional paid -in capital
300000 (10000*30)
b)
Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders' Equity section of the balance sheet. Treasury stock will be a deduction from the amounts in Stockholders' Equity.
Following is the presentation of treasury stock to be shown in Stockholders' equity:
Particulars
Amount
Common Shares outstanding
Additional paid-in capital
Add:
Additional common shares issued
Retained earnings
Less:
Cash dividend distributed
Treasury stock repurchased
Stockholders’ equity
c)
Calculation of Number of common share outstanding as on January 1, 2018:
Number of common stock = Common stock outstanding/ Par value = 2500000/1 = 2500000 shares
Calculation of Number of common share outstanding as on December 31, 2018:
Opening common stock shares = 2500000
Less: Balance of Treasury stock = 22000
(44000 – 12000 – 10000)
Number of common share outstanding as on December 31, 2018 = 2478000
Sl no.
Accounts Title and Explanation
Debit
Credit
Mar 1
Treasury Stock
44000 (44000*1)
Additional paid -in capital
1056000 (44000*24)
Cash
1100000 (44000*25)
July 1
Cash
264000 (12000*22)
Treasury stock
12000 (12000*1)
Additional paid -in capital
252000 (12000*21)
Sept 1
Cash
310000 (10000*31)
Treasury stock
10000 (10000*1)
Additional paid -in capital
300000 (10000*30)
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