Rinehart Corporation purchased from its stockholders 5,000 shares of its own pre

Question

Rinehart Corporation purchased from its stockholders 5,000 shares of its own previously issued stock for $255,000. It later resold 2,000 shares for $54 per share, then 2,000 more shares for $49 per share, and finally 1,000 shares for $43 per share.

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock.

Account Titles and Explanation

Debit

Credit

(To record purchase from stockholders.)

(To record sales of shares at $54 per share.)

(To record sales of shares at $49 per share.)

(To record sale of shares at $43 per share.)

Explanation / Answer

Shares Bought back Account     Dr 255000         To Bank Account 255000 ( Being shares of its own bought back at 255000 Bank Account                                   Dr 108000      To Shares Bought back Account 108000 ( Being the 2000 shares bought Back sold at $54 per share) Bank Account                                   Dr 98000      To Shares Bought back Account 98000 ( Being the 2000 shares bought Back sold at $49 per share) Bank Account                                   Dr 43000      To Shares Bought back Account 43000 ( Being the 1000 shares bought Back sold at $43 per share) Securities premium/ capital reserve Dr 6000      To Shares Bought back Account 6000 ( Being the net loss of the transaction adjusted with the securities premium account)

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