Problem 1 Prepare journal entries (in good form) to record the treasury stock tr

Question

Problem 1 Prepare journal entries (in good form) to record the treasury stock transactions and the closing entry for net income. Prepare the stockholders' equity section at 12/31/97 XYZ Corporation had the following stockholders' equity accounts on 1/1/97: common stock ($5 par) $500,000, Paid-In Capital $200,000, and Retained Earnings of $100,000. During 1997 the company had the following Treasury Stock transactions: Purchased 5,000 shares at $9 per share Sold 1,000 shares at $12 per share Sold 2,000 shares at $10 per share Sold 1,000 shares at $8 per share 12/1 XYZ uses the cost method of accounting for treasury stock and in 1997 the company had net income of $50,000.

Explanation / Answer

Date Account Description Debit Credit 1-Mar Treasury Stock 45000 Cash 45000 (Being Treasury Stock Purchased) 1-Jun Cash 12000 Treasory Stock 9000 Paid-in Capital 3000 (Being Treasury Stock Sold) 1-Sep Cash 20000 Treasory Stock 18000 Paid in Capital 2000 (Being Treasury Stock Sold) 1-Dec Cash 8000 Paid in Capital 1000 Treasory Stock 9000 (Being Treasury Stock Sold) XYZ Corporation Partial Balancesheet as at 31st December 1997 Common Stock, $5 par Value 100,000 shares issued , and 99000 shares Outstanding              500,000 Paid-in Capital              204,000 Retained earnings              150,000 Less: Treasury Stock, 1000 shares                  9,000 Total Shareholders Equity              863,000

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