Question

Problem 15-06 Concord Company has the following stockholders' equity accounts at December 31, 2020. Common Stock ($100 par value, authorized 7,400 shares) Retained Earnings $463,300 323,200 Prepare entries in journal form to record the following transactions, which took place during 2021. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) (1) 300 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.) (2) A $18 per share cash dividend was declared. (3) The dividend declared in (2) above was paid. (4) The treasury shares purchased in (1) above were resold at $ 102 per share. (5) 550 shares of outstanding stock were purchased at $104 per share. (6) 310 of the shares purchased in (5) above were resold at $96 per share.

Answer 1

Requirement a: Prepare the journal entries as follows

Item	Account Title and Explanation	Debit	Credit
1	Treasury Stock (300 shares × $97)	$29,100
	Cash		$29,100
	To record outstanding stock purchased
2	Retained Earnings ((($463,300 ÷ $100) − 300) × $18 per share)	$77,994
	Dividends Payable		$77,994
	To record cash dividend declared
3	Dividends Payable	$77,994
	Cash		$77,994
	To record cash dividend paid
4	Cash	$30,600
	Treasury Stock		$29,100
	Paid-in Capital from Treasury Stock ($102 − $97) × 300		$1,500
	To record treasury stock sold
5	Treasury Stock (550 shares × $104 per share)	$57,200
	Cash		$57,200
	To record outstanding stock purchased
6	Cash (310 shares × $96)	$29,760
	Paid-in Capital from Treasury Stock	$1,500
	Retained Earnings ($32,240 − $29,760 − $1500)	$980
	Treasury Stock (310 shares × $104)		$32,240
	To record sale of treasury stock

Requirement b: Prepare the stockholders' equity as follows

C Inc.
Stockholders' Equity
December 31, 2021
	Amount
Common stock, $100 par value, authorized 7,400 shares,
issued 4,633 shares, outstanding 4,393 shares	$463,300
Retained earnings ($24,960 is the amount of restricted retained earnings)	$341,526
Total Paid-in Capital and Retained Earnings	$804,826
Deduct: Treasury Stock (550 − 310) × $104	($24,960)
Total Stockholders' Equity	$779,866

Restricted retained earnings for the amount of treasury stock is $24,960 ((550 shares −310 shares ) × $104)

Notes: Compute ending balance of retained earnings as follows

Particulars	Amount
Retained earnings - Beginning balance	$323,200
Add: Net income	$97,300
Deduct: Cash Dividend	($77,994)
Deduct: Loss on sale of treasury stock	($980)
Retained earnings - Ending Balance	$341,526