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

Cengagenowv2, 1 Term Printed Access Card For Warren/reeve/duchac's Financial Accounting, 15th

15th Edition

ISBN: 9781337272353

Author: WARREN, Carl; Reeve, James M.; Duchac, Jonathan

Publisher: Cengage Learning

See similar textbooks

Concept explainers

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…

Videos

Question

Chapter 13, Problem 5PEB

To determine

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

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 13, Problem 5PEA

Chapter 13, Problem 6PEA

Students have asked these similar questions

Please explain the solution to this financial accounting problem with accurate explanations.

Given the solution and accounting question

What is the overall contribution margin ratio?

Chapter 13 Solutions

Cengagenowv2, 1 Term Printed Access Card For Warren/reeve/duchac's Financial Accounting, 15th

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

Knowledge Booster

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 And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
College Accounting, Chapters 1-27 (New in Account...
Accounting
ISBN:9781305666160
Author:James A. Heintz, Robert W. Parry
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning