Exercise 11-7 Pharoah Company purchased from its stockholders 5,300 shares of it

Question

Exercise 11-7

Pharoah Company purchased from its stockholders 5,300 shares of its own previously issued stock for $265,000. It later resold 1,875 shares for $53 per share, then 1,875 more shares for $48 per share, and finally 1,550 shares for $42 per share.

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation Debit Credit To record purchase from stockholders.) To record sales of shares at $53 per share.) To record sales of shares at $48 per share.) (To record sale of shares at $42 per share.)

Explanation / Answer

Treasury Stock   $     265,000 Cash $     265,000 Cash ($53*1,875) $        99,375 Treasury stock ($265,000/5,300*1,875) $        93,750 Paid in capital from treasury stock $          5,625 Cash (1,875*$48) $ 90,000 Paid in capital from treasury stock ($93,750-$90,000) $    3,750 Treasury stock ($265,000/5,300*1,875) $ 93,750 Cash (1,550*$42) $ 65,100 Paid in capital from treasury stock ($5,625-$3,750) $    1,875 Retained earnings ($77,500-$65,100-$1,875) $ 10,525 Treasury stock ($265,000/5,300*1,550) $ 77,500

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