Question

P13-2B Dougherty Corporation had the following stockholders' equity accounts on January 21, 2012: Common Stock (51 par) $400,000, Paid-in Capital in Excess of Par-Common Stock $500,000, and Retained Earnings $100,000. In 2012, the company had the following treasury stock transactions. Mar. 1 Purchased 5,000 shares at $7 per share. June 1 Sold 1,000 shares at $10 per share. Sept. 1 Sold 2,000 shares at $9 per share. Dec. 1 Sold 1,000 shares at $5 per share. Dougherty Corporation uses the cost method of accounting for treasury stock. In 2012, the company reported net income of $80,000. Instructions (a) Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2012, for net income (b) Open accounts for (1) Paid-in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earings. Post to these accounts using J12 as the posting reference. (©) Prepare the stockholders' equity section for Dougherty Corporation at December 31, 2012.

Answer 1

(a)

Date	General Journal	Debit	Credit
Mar. 1	Treasury stock (5000 x $7)	35000
	Cash		35000
	(To record purchase of treasury stock)
Jun. 1	Cash (1000 x $10)	10000
	Treasury stock (1000 x $7)		7000
	Paid-in capital from treasury stock		3000
	(To record sale of treasury stock)
Sept. 1	Cash (2000 x $9)	18000
	Treasury stock (2000 x $7)		14000
	Paid-in capital from treasury stock		4000
	(To record sale of treasury stock)
Dec. 1	Cash (1000 x $5)	5000
	Paid-in capital from treasury stock	2000
	Treasury stock (1000 x $7)		7000
	(To record sale of treasury stock)
Dec. 31	Income summary	80000
	Retained earnings		80000
	(To record closing entry for net income)

(b)

Paid-in Capital from Treasury Stock
Date	Post. Ref.	Debit	Credit	Balance
Jun. 1	J12		3000	3000
Sept. 1	J12		4000	7000
Dec. 1	J12	2000		5000
Treasury Stock
Date	Post. Ref.	Debit	Credit	Balance
Mar. 1	J12	35000		35000
Jun. 1	J12		7000	28000
Sept. 1	J12		14000	14000
Dec. 1	J12		7000	7000
Retained Earnings
Date	Post. Ref.	Debit	Credit	Balance
Jan. 1	√			100000
Dec. 31	J12		80000	180000

(c)

Dougherty Corporation
Balance Sheet (Partial)
December 31, 2012
Stockholders' Equity:
Common stock ($1 par)	400000
Paid-in capital in excess of par-common stock	500000
Paid-in capital from treasury stock	5000
Total paid-in capital	905000
Retained earnings	180000
Less: Treasury stock	-7000
Total stockholders' equity $	1078000