Question

Problem 15-5 Before Whispering Corporation engages in the treasury stock transactions listed below, its general ledger reflects, among others, the following account balances (par value of its stock is $30 per share). Paid-in Capital in Excess of Par- Common Stock Common Stock $265,200 Retained Earnings $87,300 $91,100 Record the treasury stock transactions (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes. (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.) (a) Bought 390 shares of treasury stock at $40 per share. (b) Bought 280 shares of treasury stock at $44 per share. (c) Sold 370 shares of treasury stock at $42 per share. (d) Sold 110 shares of treasury stock at $38 per share.

Answer 1

Solution:

No.	Account Titles and Explanation	Debit	Credit
a	Treasury Stock (390 Shares*$40)	$           15,600
	Cash		$              15,600
	(Being Treasury Stock purchased)
b	Treasury Stock (280 Shares* $44)	$           12,320
	Cash		$              12,320
	(Being Treasury Stock purchased)
c	Cash (370 Shares* $42)	$           15,540
	Treasury Stock (370 Shares*$40)		$              14,800
	Add Paid-In Cap - Treasury Stock (370 Shares*$2)		$                    740
	(Being treasury stock resold)
d	Cash(110 Shares*$38)	$             4,180
	Add Paid-In Cap - Treasury Stock ((20 Shares*$2)+(90 Shares*$6))	$                 580
	Treasury Stock((20 Shares*$40)+(90 Shares*$44))		$                4,760
	(Being treasury stock resold)

Notes:

1) In transaction D, Treasury stock are sold for less price than the actual cost. So, that is why  Add Paid-In Cap - Treasury Stock is debited.