National Supply’s shareholders’ equity included the following accounts at December 31, 2020: Shareholders' Equity Common stock,...
National Supply’s shareholders’ equity included the following
accounts at December 31, 2020:
| Shareholders' Equity | ||
| Common stock, 5 million shares at $1 par | $ | 5,000,000 |
| Paid-in capital—excess of par | 30,000,000 | |
| Retained earnings | 98,500,000 | |
Required:
1. National Supply reacquired shares of its common
stock in two separate transactions and later sold shares. Prepare
the entries for each of the transactions under each of two separate
assumptions: the shares are (a) retired and (b) accounted for as
treasury stock.
| February 15, 2021 | Reacquired 480,000 shares at $9 per share. |
| February 17, 2022 | Reacquired 480,000 shares at $6.50 per share. |
| November 9, 2023 | Sold 335,000 shares at $8 per share (assume FIFO cost). |
2. Prepare the shareholders’ equity section of
National Supply’s balance sheet at December 31, 2023, assuming the
shares are (a) retired and (b) accounted for as treasury stock. Net
income was $20 million in 2021, $22 million in 2022, and $24
million in 2023. No dividends were paid during the three-year
period.
Homework Answers
1.Entries
Reacquire equity share at premium
.Due date feb.15,2021
Reacquire equity share capital account dr. 480000
Premium on reacuirea share account dr. 3840000
To equity share holder account. Cr. 4320000
. payment
When payment is made to share holders
Equity share holder dr. 4320000
To bank cr. 4320000
.Feb 17,2022
Due
Reacquire equity share capital account dr 480000
Premium on reacquire. Dr. 2640000
To equity share holder cr. 3120000
Payment
When payment is made to share holders
Equity share holder dr .3120000
To bank cr .3120000
November 9, 2023
Share are sold to public 335000@ $8
Bank account dr .2680000
To equity share capital . 335000
To security premium 2345000
(Share issue at $ 8 ,
2. Balance sheet
Share holder fund
Share holder equity
Common stock 5 million share note 1 . 4375000
Paid in capital. 30000000
Retained earning. 98500000
Note :1 share capital 500000
Less: reacquire 2021. -480000
Less: reacquire 2022. -480000
Add: issue share 335000
TOTAL. 4375000
Add Answer to:
National Supply’s shareholders’ equity included the following
accounts at December 31, 2020:
Shareholders' Equity
Common stock,...
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