On January 1, West Company had outstanding 10,000 shares of $10 par common stock, which had been originally issued at an average price of $35 per share. During the year, West engaged in the following treasury stock transactions:1.Reacquired 1,000 shares of its common stock for $33 per share.2.Reissued 600 shares of the treasury stock for $35 per share.3.Reissued 300 shares of the treasury stock for $32 per share.4.Retired the remaining 100 shares of treasury stock. Required: Prepare journal entries to record the preceding treasury stock transactions for West assuming it uses (1) the cost method and (2) the par value method.

Answered: Required: Prepare journal entries to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On January 1, West Company had outstanding 10,000 shares of $10 par common stock, which had been originally issued at an average price of $35 per share. During the year, West engaged in the following treasury stock transactions:

1.	Reacquired 1,000 shares of its common stock for $33 per share.
2.	Reissued 600 shares of the treasury stock for $35 per share.
3.	Reissued 300 shares of the treasury stock for $32 per share.
4.	Retired the remaining 100 shares of treasury stock.

Required:

Prepare journal entries to record the preceding treasury stock transactions for West assuming it uses (1) the cost method and (2) the par value method.

Expert Solution

Recording the treasury stock transactions under cost method:

Under the cost method, the treasury stock is recorded at the repurchased cost. When treasury stock is reissued above the repurchased cost then the excess amount is credited to the additional paid-in capital.

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