The shareholders\' equity section of the balance sheet of TNL Systems Inc. inclu

Question

The shareholders' equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2015: Shareholders' Equity Common stock, 390 million shares at $1 par 390 Paid-in capital-excess of par Paid-in capital-share repurchase Retained eamings (S in millions) 3,510 2,900 Required: 1. During 2016, TNL Systems reacquired shares of its common stock and later sold shares in two separate transactions. Prepare the entries for both the purchase and subsequent resale of the shares assuming the shares are (a) retired and (b) viewed as treasury stock. (if no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) a. On February 5, 2016, TNL Systems purchased 9 million shares at $14 per share. b. On July 9, 2016, the corporation sold 4 million shares at $16 per share. c. On November 14, 2018, the corporation sold 4 million shares at $11 per share.

Explanation / Answer

1) a) Retired (in million) (in million) Date Account Head & Description Debit Amount Credit Amount Feb 5, 2016 Common stock (9*$1) 9 Paid-in-capital - Share repurchase (9*$13) 117 Cash (9*14) 126 (to record the repurchase of common stock) Jul 9, 2016 Cash (4*16) 64 Common stock (4*$1) 4 Paid-in-capital - Share repurchase (4*$15) 60 (to record the sale of common stock) Nov 14, 2018 Cash (4*11) 44 Common stock (4*$1) 4 Paid-in-capital - Share repurchase (4*$10) 40 (to record the sale of common stock) 1) a) Viewed as treasury stock (in million) (in million) Date Account Head & Description Debit Amount Credit Amount Feb 5, 2016 Treasury stock (9*$14) 126 Cash (9*14) 126 (to record the repurchase of Treasury stock) Jul 9, 2016 Cash (4*16) 64 Treasury stock (4*$1) 4 Paid-in-capital - Share repurchase (4*$15) 60 (to record the sale of Treasury stock) Nov 14, 2018 Cash (4*11) 44 Treasury stock (4*$1) 4 Paid-in-capital - Share repurchase (4*$10) 40 (to record the sale of Treasury stock) 2) Stockholders' Equity December 31, 2018 (in million) (in million) Retirement Treasury stock Paid-in capital: Common stock 389 390 (390-9+4+4) Paid-in capital-Excess of par 3493 3510 (3510-117+60+40) Paid-in capital-Share repurchase 2 102 (2+60+40) Total paid-in capital 3884 4002 Retained earnings 2900 2900 Total paid-in capital & Retained earnings 6784 6902 Less: Treasury stock 0 -118 (126-4-4) Total stockholders' equity 6784 6784

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