Fechter Corporation had the following stockholders’ equity accounts on January 1
ID: 2459133 • Letter: F
Question
Fechter Corporation had the following stockholders’ equity accounts on January 1, 2014: Common Stock ($5 par) $547,900, Paid-in Capital in Excess of Par—Common Stock $206,440, and Retained Earnings $110,910. In 2014, the company had the following treasury stock transactions.
Fechter Corporation uses the cost method of accounting for treasury stock. In 2014, the company reported net income of $26,110.
Open accounts for Paid-in Capital from Treasury Stock, Treasury Stock, and Retained Earnings. Post to these accounts using J10 as the posting reference.
Prepare the stockholders’ equity section for Fechter Corporation at December 31, 2014.
Mar. 1 Purchased 5,720 shares at $9 per share. June 1 Sold 1,060 shares at $12 per share. Sept. 1 Sold 1,010 shares at $10 per share. Dec. 1 Sold 1,410 shares at $6 per share.Explanation / Answer
Paid in Capital from Treasury stock Date Posting Ref Narration Amount Date Posting Ref Narration Amount Dr Cr December 1 2014 J10 sold 1010 treaury stock @ 6 per share 4190 June 1 2014 J10 sold 1060 treaury stock @ 12 per share 3180 Sep 1 2014 J10 sold 1010 treaury stock @ 10 per share 1010 4190 4190 Calculation : June 1 purchase : Original cost of treasury stock is 9 /- , now sold for 12/- . hence 3 * 1060 = 3180 , is credited to Paid in capital treasury stock Sep 1 purchase : Original cost of treasury stock is 9 /- , now sold for 10/- . hence 1 * 1010 = 1010 , is credited to Paid in capital treasury stock Dec 1 purchase : Original cost of treasury stock is 9 /- , now sold for 6/- . hence 3 * 1410 = 4230 , is a loss and should be debited to Paid in capital treasury stock, but the balance availble in paid in treasury stock is 4190 hence only 4190 is debited to this account and the balnce 40 ( 4230 - 4190) is debited to retained earnings Treasury stock Date Posting Ref Narration Amount Date Posting Ref Narration Amount Dr Cr March 1 2014 J10 purchased 5720 treaury stock @ 9 per share 51480 June 1 2014 J10 sold 1060 treaury stock @ 12 per share 9540 ( 1060*9) Sep 1 2014 J10 sold 1010 treaury stock @ 10 per share 9090 (1010*9) Dec 1 2014 J10 sold 1410 treaury stock @ 6 per share 12690 (1410*9) Dec 31 2014 By closing balance 20160 (2240*9) 51480 51480 Retained Earnings Date Posting Ref Narration Amount Date Posting Ref Narration Amount Dr Cr Dec 1 2014 J10 sold 1010 treaury stock @ 6 per share 40 Jan 1 2014 By opening balance 110910 Dec 31 2014 To closing balance 136980 Dec 31 2014 By amount transferred for the year 26110 137020 137020 Stockholders equity Section Paid in capital Common stock @ $ 5 par for 109580 stock 547900 Paid in capital in excess of par - common 206440 Total paid in capital 754340 Retained earnings 136980 Subtotal 891320 Less : treasury stock at cost ( 2240 @ 9) 20160 Total stockholders equity 871160
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