On December 31, 2015, Rebel Corporation\'s balance sheet reported the following.

Question

On December 31, 2015, Rebel Corporation's balance sheet reported the following.

During 2016, Rebel decided to discontinue accounting for share buybacks as treasury shares. Instead, the shares will be treated as having been retired.

Prepare the appropriate journal entry to reclassify treasury shares as retired shares. (Do not round your per share amounts. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

On December 31, 2015, Rebel Corporation's balance sheet reported the following.

Explanation / Answer

Journal Entry Common stock Account Dr.      14,000 Additional Paid in capital - common stock Dr.      33,600 Retained earning account Dr. 372,400 To Treasury stock account        420,000 (being retirement of treasury stock ) No. of common stock (1000000/1=1000000) Cost of share (3400000/1000000=3.4) Additional paid in capital associated with 14,000 shares: 14,000 × ($3.4 – $1). **Retained earnings account has been debited with the remaining amount: ($12,000 – $5,000 – $3,000).

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