Question

Accounting for Treasury Stock On February 1, 2019, Destiny Enterprise repurchases 820 shares of its outstanding common stock for $9 per share. On March 1, 2019, Destiny sells 320 shares of treasury stock for $12 per share. On May 10, 2019, Destiny sells the remaining 500 shares of its treasury stock for $6 per share.

Required: Prepare the journal entries to record these transactions.

2019 Feb. 1

Treasury Stock

Cash

(Record purchase of treasury shares) Mar. 1

Cash

Treasury Stock

Additional Paid-In Capital - Treasury Stock

(Record reissue of treasury shares) May 10

Cash

Additional Paid-In Capital - Treasury Stock

Retained Earnings

Treasury Stock (Record reissue of treasury shares)

Answer 1

Date	General Journal	Debit	Credit
Feb. 1, 2019	Treasury stock	$7,380
	Cash		$7,380
	(Record purchase of treasury shares)
March 1	Cash	$3,840
	Treasury stock		$2,880
	Additional paid in capital- Treasury stock		$960
	(Record reissue of treasury shares)
May 10	Cash	$3,000
	Additional paid in capital- Treasury stock	$960
	Retained earnings	$540
	Treasury stock		$4,500
	(Record reissue of treasury shares)

Cost of treasury stock purchased on Feb.1 = Number of shares purchased x cost per share

= 820 xc9

= $7,380

On March 1 cash will be debited by cash proceeds from issue treasury stock i.e. by = 320 x 12

= $3,840

On March 1, Treasury stock will be credited by cost price of Treasury stock = 320 x 9

= $2,880

On March 1, Additional paid in capital will be credited by issue price in excess of cost price of Treasury stock = 320 x (12-9)

= $960

Cash debited on May 10 = 500 x 6

= $3,000

Treasury stock credited on May 10 by cost price = 500 x 9

= $4,500

Additional paid in capital will be debited by $960 on May 10, and remaining difference between cost price and issue price will be debited to retained earnings.

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