On October 10, the stockholders\' equity of Sherm Systems appears as follows: Co

Question

On October 10, the stockholders' equity of Sherm Systems appears as follows: Common stock-$10 par value, 92,000 shares authorized, issued, and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $920,000 316,000 1,024,000 $ 2,260,000 1. Prepare journal entries to record the following transactions for Sherm Systems a. Purchased 7,000 shares of its own common stock at $45 per share on October 11 b. Sold 1,500 treasury shares on November 1 for $51 cash per share. c. Sold all remaining treasury shares on November 25 for $40 cash per share.

Explanation / Answer

Journal entry :

2) Revised equity section :

Date accounts & explanation debit credit Oct 11 Treasury stock (7000*45) 315000 Cash 315000 (To record treasury stock purchased) Nov 1 Cash (1500*51) 76500 Treasury stock (1500*45) 67500 Paid in capital from sale of treasury stock 9000 (To record sale of treasury stock) Nov 25 Cash (5500*40) 220000 Paid in capital from sale of treasury stock 9000 Retained earnings 18500 Treasury stock (5500*45) 247500 (To record sale of treasury stock)

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