Mask Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 15, 2020, Mask purchased 1,000 shares of treasury stock for $18 per share. Mask uses the cost method to account for treasury stock. On September 14, 2020, Mask sold 500 shares of the treasury stock for $20 per share. In October 2020, Mask declared and distributed 1,950 shares as a stock dividend from unissued shares when the market price of the common stock was $21 per share. On December 20, 2020, Mask declared a $1 per share cash dividend, payable on January 10, 2021, to shareholders of record on December 31, 2020. Instructions a.    How should Mask account for the purchase and sale of the treasury stock, and how should the treasury stock be presented in the balance sheet at December 31, 2020? b.    How should Mask account for the stock dividend, and how would it affect the stockholders’ equity at December 31, 2020? Why? c.    How should Mask account for the cash dividend, and how would it affect the balance sheet at December 31, 2020? Why?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Mask Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 15, 2020, Mask purchased 1,000 shares of treasury stock for $18 per share. Mask uses the cost method to account for treasury stock. On September 14, 2020, Mask sold 500 shares of the treasury stock for $20 per share.

In October 2020, Mask declared and distributed 1,950 shares as a stock dividend from unissued shares when the market price of the common stock was $21 per share.

On December 20, 2020, Mask declared a $1 per share cash dividend, payable on January 10, 2021, to shareholders of record on December 31, 2020.

Instructions

a.    How should Mask account for the purchase and sale of the treasury stock, and how should the treasury stock be presented in the balance sheet at December 31, 2020?

b.    How should Mask account for the stock dividend, and how would it affect the stockholders’ equity at December 31, 2020? Why?

c.    How should Mask account for the cash dividend, and how would it affect the balance sheet at December 31, 2020? Why?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 3 images

Blurred answer
Knowledge Booster
Earning per share and Dilutive securities
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education