Question

 On October 10, the stockholders' equity of Sherman Systems appears as follows.

 Common stock-$10 par value, 72,000 shares authorized, issued, and outstanding   $720,000

 Paid-in capital in excess of par value, common stock                                          216,000

 Retained earnings                                                                                           864,000

 Total stockholders' equity                                                                                $ 1, 800,000

 1. Prepare journal entries to record the following transactions for Sherman Systems.

 a. Purchased 5,000 shares of its own common stock at $25 per share on October 11.

 b. Sold 1,000 treasury shares on November 1 for $31 cash per share.

 c. Sold all remaining treasury shares on November 25 for $20 cash per share.

 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.

Answer 1

Sollution:-1)Journal entries are shown below:-

Journal entries are shown below
Date	General Journal	Debit	Credit
11-Oct	Treasury stock (5,000*25)	$125,000
	Cash		$125,000
	(To record treasury stock purchased)
01-Nov	Cash (1,000*31)	$31,000
	Treasury stock (1,000*25)		$25,000
	Paid in capital - treasury stock (91,000-81,250)		$6,000
	(To record treasury stock sold)
25-Nov	Cash (4,000*20)	$80,000
	Paid in capital - treasury stock	$6,000
	Retained earnings ($80,000+$6,000-$100,000)	$14,000
	Treasury stock (4,000*25)		$100,000
	(To record treasury stock sold)

Sollution:-2)Calculation of stockholder,s equity section after october,11 treasury stock purchase is shown below:-

Stockholder's equity section	Amount
Common stock, $10 par value, 72,000 shares authorized, issued and 89,500 outstanding	$720,000
Paid in capital in excess of par value, common stock	$216,000
Total contributed capital	$936,000
Retained earnings	$864,000
Total	$1,800,000
Less: Cost of treasury stock	$125,000
Total stockholder's equity	$1,675,000