Chapter 13, Problem 13.2AP

(a)

To determine

Treasury Stock: The treasury stock is that stock which is traded in the open market. These are the issued and outstanding common stocks which are acquired by the different business entities to meet their needs for the fund.

Stockholder’s equity: The stockholder’s equity refers to the right of the stockholder’s in the business. The stockholder’s equity is built up of two items, the paid-up capital from the shareholders and the retained earnings of the business.

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

• To increase the balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue, and gains.
• To decrease the balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue, and gains.

To prepare: The journal entries for the treasury stock transactions and the closing entry for net income.

(b)

To determine

To prepare: The postings to be done in stockholder’s equity accounts.

(c)

To determine

To prepare: The stockholder’s equity section.