Question

Blue Company has the following stockholders' equity accounts at December 31, 2020. Common Stock ($100 par value, authorized 8,300 shares) Retained Earnings $484,900 274,500 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) 270 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.) (2) A $22 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 $103 per share. (5) 510 shares of outstanding stock were purchased at $105 per share. (6) 340 of the shares purchased in (5) above were resold at $96 per share. No. Account Titles and Explanation Debit Credit si mi o

Answer 1

Treasury Stock : It is the stock which is reacquired by the company and has not been retired. When the treasury stock is issued above the cost at which the treasury stock is acquired, the difference between the issue price of treasury stock and cost of treasury stock is credited Paid in Capital Treasury Stock and treasury stock is credited at cost price. When the treasury stock is issued below the cost at which the treasury stock is acquired, the difference between the issue price and cost of treasury stock is debited Paid in Capital Treasury Stock to the amount available in the Paid in Capital Treasury Stock and the remaining is debited to retailed earnings account and treasury stock is credited at cost price.

Sr.No Credit Debit $26,190 [270 x $97] $26,190 $1,76,660 [(8300-270)x$22] $1,76,660 $1,76,660 $27,810 Account Title Treasury Stock Cash Retained Earnings Dividend Payable Dividend Payable Cash Cash Paid in Capital- Treasury Stock Treasury Stock Treasury Stock Cash Cash Paid in Capital- Treasury Stock Retained Earnings Treasury Stock $1,76,660 [270 x $103] $1,620 [270 x $6] $26,190 [270 x $97] [510 x $105] $53,550 [340 x $96] $53,550 $32,640 $1,620 $1,440 $35,700 [340 x $105] Blue Company Stockholders' Equity December 31, 2021 Common Stock Retained Earnings Total Less: Retained Earnings Total Stockholders' Equity $4,84,900 $1,84,500 [$274500-$176660-$1440+$88100] $6,69,400 $17,850 [$53550-$35700] $6,51,550