Fechter Corporation had the following stockholders’ equity accounts on January 1

Question

Fechter Corporation had the following stockholders’ equity accounts on January 1, 2017: Common Stock ($5 par) $535,200, Paid-in Capital in Excess of Par—Common Stock $195,800, and Retained Earnings $100,350. In 2017, the company had the following treasury stock transactions. Mar. 1 Purchased 5,870 shares at $9 per share. June 1 Sold 1,130 shares at $13 per share. Sept. 1 Sold 1,170 shares at $11 per share. Dec. 1 Sold 1,090 shares at $6 per share. Fechter Corporation uses the cost method of accounting for treasury stock. In 2017, the company reported net income of $30,680. Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2017, for net income.

Explanation / Answer

Date Account Titles & Explanations Debit Credit 1-Mar-17 Treasury Stock 52830 Cash 52830 (purchase of 5870 shares @ 9) 1-Jun-17 Cash 14690 Treasury Stock 10170 Paid in capital in excess of par-Treasury stock 4520 (sale of 1130 treasury stock @ $13) 1-Dec-17 Cash 6540 Paid in capital in excess of par-Treasury stock 3270 Treasury Stock 9810 (sale of 1090 treasury stock @ $6) 31-Dec-17 Income Summary 30680 Retained Earnings 30680 (Net income closed to retained earnings)

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