Survey Of Accounting
Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 8, Problem 13E

Exercise 8-13 Recording and reporting treasury stock transactions

The following information pertains to JAE Corp. at January 1, 2018:

Chapter 8, Problem 13E, Exercise 8-13 Recording and reporting treasury stock transactions The following information pertains

JAE Corp. completed the following transactions during 2018:

  1. 1. Issued 3,000 shares of $10 par common stock for $25 per share.
  2. 2. Repurchased 500 shares of its own common stock for $26 per share.
  3. 3. Resold 200 shares of treasury stock for $30 per share.

Required

  1. a. How many shares of common stock were outstanding at the end of the period?
  2. b. How many shares of common stock had been issued at the end of the period?
  3. c. Organize the transactions data in accounts under the accounting equation.
  4. d. Prepare the stockholders’ equity section of the balance sheet reflecting these transactions. Include the number of shares authorized, issued, and outstanding in the description of the common stock.

a)

Expert Solution
Check Mark
To determine

Ascertain the total number of outstanding shares at the end of the period.

Explanation of Solution

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Ascertain the total number of outstanding shares at the end of the period:

Common StockOutstanding
Beginning Number of Shares2,000
Issued during 20163,000
Less: Repurchased as Treasury Stock(500)
Resold Treasury Stock200
Ending number of shares4,700

Table (1)

Therefore, the total number of outstanding shares at the end of the period is 4,700 shares.

b)

Expert Solution
Check Mark
To determine

Ascertain the total number of issued shares at the end of the period.

Explanation of Solution

Ascertain the total number of issued shares at the end of the period:

Common StockIssued
Beginning Number of Shares2,000
Issued during 20163,000
Ending Number of Shares5,000

Table (2)

Therefore, the total number of issued shares at the end of the period is 5,000 shares.

c)

Expert Solution
Check Mark
To determine

Organize the transactions data in accounts under the accounting equation.

Explanation of Solution

Organize the transactions data in accounts under the accounting equation:

Survey Of Accounting, Chapter 8, Problem 13E

Table (3)

Working note:

(1) Calculate the value of cash received from the issuance of common stock:

Cash received = Number of shares × Issued value of common stock= 3,000 shares × $25= $75,000

(2) Calculate the value of common stock issued at par value:

Common stock value} = Number of shares × Par value of common stock= 3,000 shares × $10= $30,000

(3) Calculate the value of paid-in capital in excess of par value:

Paid-in capital in excess of par value} = (Cash received (1)Common stock value (2) )= $75,000 – $30,000= $45,000

(4) Calculate the value of treasury stock:

Treasury stock = [Number of repurchase shares× Value of per share]=500×$26 per share=$13,000

(5) Calculate the value of cash received from the resold of treasury stock:

Cash received = Number of resold shares × Selling price per share= 200 shares × $30= $6,000

(6) Calculate the value of treasury stock resold at original cost:

Treasury stock  = Number of resold shares × Original cost per share= 200 shares × $26= $5,200

(7) Calculate the value of paid-in capital in excess of cost, TS:

Paid-in capital in excess of cost} = (Cash received (5)Common stock value (6) )= $6,000 – $5,200= $800

d)

Expert Solution
Check Mark
To determine

Prepare the stockholder’s equity section of the balance sheet.

Explanation of Solution

Stockholders’ Equity Section: Stockholder’s equity section is the section of the balance sheet that shows the available balance stockholders’ equity as on reported date at the end of the financial year.

Prepare the stockholder’s equity section of the balance sheet:

Stockholders’ Equity$$
Common Stock, $10 par value, 20,000 shares authorized, 5,000 shares issued, and 4,700 shares outstanding50,000
Paid-In Capital in Excess of Par, Common60,000
Paid-In Capital in Excess of Cost, TS800
Total Paid-In Capital110,800
Add: Retained Earnings82,000
Less: Treasury Stock(7,800)
Total Stockholders’ Equity185,000

Table (6)

Therefore, the total value of stockholder’s equity at the end of the year is $185,000.

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Chapter 8 Solutions

Survey Of Accounting

Ch. 8 - 11. What is the difference between contributed...Ch. 8 - Prob. 12QCh. 8 - Prob. 13QCh. 8 - 14. What is the meaning of each of the following...Ch. 8 - 15. What is the difference between cumulative...Ch. 8 - 16. What is no-par stock? How is it recorded in...Ch. 8 - 17. Assume that Best Co. has issued and...Ch. 8 - 18. If Best Co. issued 10,000 shares of 20 par...Ch. 8 - 19. What is the difference between par value stock...Ch. 8 - 20. Why might a company repurchase its own stock?Ch. 8 - 21. What effect does the purchase of treasury...Ch. 8 - 22. Assume that Day Company repurchased 1,000 of...Ch. 8 - 23. What is the importance of the declaration...Ch. 8 - 24. What is the difference between a stock...Ch. 8 - 25. Why would a company choose to distribute a...Ch. 8 - 26. What is the primary reason that a company...Ch. 8 - 27. If Best Co. had 10,000 shares of 20 par value...Ch. 8 - 28. When a company appropriates retained earnings,...Ch. 8 - Prob. 29QCh. 8 - Prob. 30QCh. 8 - Prob. 31QCh. 8 - 32. What are some reasons that a corporation might...Ch. 8 - Prob. 1ECh. 8 - Exercise 8-2 Effect of accounting events on the...Ch. 8 - Prob. 3ECh. 8 - Prob. 4ECh. 8 - Exercise 8-5 Characteristics of capital stock The...Ch. 8 - Exercise 8-6 Effect of issuing common stock on the...Ch. 8 - Exercise 8-7 Recording and reporting common and...Ch. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Exercise 8-13 Recording and reporting treasury...Ch. 8 - Prob. 14ECh. 8 - Prob. 15ECh. 8 - Prob. 16ECh. 8 - Prob. 17ECh. 8 - Prob. 18ECh. 8 - Prob. 19PCh. 8 - Problem 8-20 Effect of business structure on...Ch. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Problem 8-23 Recording and reporting stock...Ch. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Problem 8-26 Treasury stock transactions and...Ch. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 1ATCCh. 8 - ATC 8-3 Research Assignment Analyzing Skecherss...Ch. 8 - Prob. 4ATCCh. 8 - ATC 11-7 Ethical Dilemma Bad news versus very bad...
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Stockholders Equity: How to Calculate?; Author: Accounting University;https://www.youtube.com/watch?v=2jZk1T5GIlw;License: Standard Youtube License