The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2020: Shareholders' Equity($ in millions)Common stock, 340 million shares at $1 par$340 Paid-in capital—excess of par2,720 Paid-in capital—share repurchase1 Retained earnings2,400 Required:1. During 2021, 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. On February 5, 2021.Record the purchase of 8 million shares at $12 per share assuming the shares are retired.On July 9, 2021, Record the sale of 2 million shares at $14 per share.On November 14, 2023, Record the sale of 2 million shares at $9 per share Record the purchase of 8 million shares at $12 per share assuming the shares are viewed as treasury stock. 2. Prepare the shareholders’ equity section of TNL Systems’ balance sheet at December 31, 2023, comparing the two approaches. Assume all net income earned in 2021–2023 was distributed to shareholders as cash dividends.

Treasury stocks refers to shares that are reacquired or repurchase by company from market. When…

Answered: During 2021, TNL Systems reacquired…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2020:

Shareholders' Equity	($ in millions)
Common stock, 340 million shares at $1 par	$340
Paid-in capital—excess of par	2,720
Paid-in capital—share repurchase	1
Retained earnings	2,400

Required:
1. During 2021, 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.

On February 5, 2021.Record the purchase of 8 million shares at $12 per share assuming the shares are retired.
On July 9, 2021, Record the sale of 2 million shares at $14 per share.
On November 14, 2023, Record the sale of 2 million shares at $9 per share
Record the purchase of 8 million shares at $12 per share assuming the shares are viewed as treasury stock.

2. Prepare the shareholders’ equity section of TNL Systems’ balance sheet at December 31, 2023, comparing the two approaches. Assume all net income earned in 2021–2023 was distributed to shareholders as cash dividends.

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