Treasury Stock, Cost and Par Value Methods On January 1, West Company had outsta

Question

Treasury Stock, Cost and Par Value Methods

On January 1, West Company had outstanding 10,000 shares of $10 par common stock, which had been originally issued at an average price of $35 per share. During the year, West engaged in the following treasury stock transactions:

Reacquired 1,000 shares of its common stock for $33 per share.

Reissued 600 shares of the treasury stock for $35 per share.

Reissued 300 shares of the treasury stock for $32 per share.

Retired the remaining 100 shares of treasury stock.

Prepare journal entries to record the preceding treasury stock transactions for West Company assuming it uses the par value method. For compound entries, if an amount box does not require an entry, leave it blank.

Explanation / Answer

Cost Method

Treasury Stock a/c Dr $33000

Cash a/c $33000

(Being stock acquired @ $33 each for 1000 shares)

  Cash a/c Dr $21000

Paid in capital in excess of par ((35-33)$*600) $1200

Treasury Stock ($33*600) $19800

(Being treasury stock reissued at a profit of $2 which is transferred to paid in capital a/c)

Cash a/c Dr $9600

Paid in capital in excess of par ((32-33)$*300) $300

Treasury Stock ($33*300) $9900

(Being treasury stock reissued at a loss of $1 each for 300 shares charged to paid in capital a/c)

Comon stock(100*$10) $1000

Paid in capital in excess of par $2300

Treasuary Stock a/c $3300

(Being 100 shares retired the reversing the amount of the original price at which the stock was sold. .)

Par Value

Treasury Stock (1000*$10) $10000

Paid-in Capital in excess of par-common (10000*$23) $23000

Cash $33000

(Being stock recorded at par and paid in capital @ $23 are debited and difference between shares acquired and original amount including excess of par )

Cash a/c Dr $21000

Treasury Stock a/c(600*$10) $6000

   Paid-in Capital in excess of par-common (600*$25) $15000

(Being treasuary stock reissued)

Cash a/c Dr $9600

Treasury Stock a/c(300*$10) $3000

   Paid-in Capital in excess of par-common (300*$22) $6600

(Being treasuary stock reissued)

Common Stock a/(100*$10) $1000

Treasury Stock $1000

( 100 stock retired)

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