Explanation Treasury Stock : It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement. Record the purchase of 75,000 shares of its own stock at $8 per share. Date Account Titles and Explanation Debit ($) Credit ($) May 27 Treasury Stock ( 75,000 shares × $8 per share ) 600,000 Cash 600,000 (To record purchase of treasury stock) Table (1) Treasury stock is contra- stockholders’ equity account with a normal debit balance. Thus, when treasury stocks are purchased, it decreases the stockholders’ equity account. In this case, it reduces the stockholders’ equity by $600,000. Therefore, treasury stock account is debited with $600,000. Cash is an asset. It is decreased as cash is paid for the purchase of treasury stock. Therefore, the cash account is credited with $600,000. Treasury stock does not affect the net income, as the net income would be affected by change in revenues and expenses. Record the resale of 54,000 shares of treasury stock for cash at $11 per share. Date Account Titles and Explanation Debit ($) Credit ($) August 3 Cash ( 54,000 shares × $11 per share ) 594,000 Treasury stock ( 54,000 shares × $8 per share ) 432,000 Paid-in capital from treasury stock ( 594 , 000 − $ 432 , 000 ) 162,000 (To record sale of treasury stock for above the cost price) Table (2) Cash is an asset

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Author: Carl Warren, James M. Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The sto…

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Journalize the transactions of May 27, August 3, and November 14.

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Financial Accounting

Ch. 13 - Of two corporations organized at approximately the...Ch. 13 - A stockbroker advises a client to buy preferred...Ch. 13 - A corporation with both preferred stock and common...Ch. 13 - An owner of 2,500 shares of Simmons Company common...Ch. 13 - Prob. 5DQ Ch. 13 - What is the primary purpose of a stock split?Ch. 13 - A corporation reacquires 60,000 shares of its own...Ch. 13 - The treasury stock in Discussion Question 7 is...Ch. 13 - What are the three classifications of restrictions...Ch. 13 - Prob. 10DQ

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