Chapter 13, Problem E13.24E

To determine

Treasury Stock:

The Treasury stock is a own stock capital which has been purchased by the corporation for reissue it again among the inventors or for retirement of stock capital especially preferred stock capital which contain fixed preferred dividend commitment.

Whenever, the corporation observed surplus money in the business and favorable market prices, it purchased its own stock in the open market at a prevalent price and carried in the books as reduction in stockholder’s equity and issued shares.

Because of carrying the treasury stock in the books, the balance of issued shares will be different from the outstanding shares. The issued shares are those shares which are actually issued in the market including held as treasury stock. But the outstanding stock are those which are due to paid off the real investors which does not include the treasury stock as these are self-owned by the corporation.

When such treasury stock will be later reissued again in open market at the prevalent rate of later date which may be more or less than cost price. When the price is more than cost price, the gain shall be recorded in Paid in capital-Treasury Stock Account.

And there is a loss on reissued, then if there exist balance in Above Paid in capital-Treasury Stock Account then it will be adjusted from it. Else it will be charged to retained earnings.

Requirement:

The Journal entries for issuance and purchase and resale of Treasury stock by the corporation.