Question

On October 10, the stockholders' equity of Sherman Systems appears as follows: Common stock-$10 par value, 72,000 shares authorized, issued, and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 720,000 216,000 864,000 $ 1,800,000 1. Prepare journal entries to record the following transactions for Sherman Systems. a. Purchased 5,000 shares of its own common stock at $25 per share on October 11. b. Sold 1,000 treasury shares on November 1 for $31 cash per share. c. Sold all remaining treasury shares on November 25 for $20 cash per share.

Answer 1

Cost of shares reacquired on October 11 = 5,000 x 25
= $125,000
Cash proceeds from sale of treasury shares on November 1 = 1,000 x 31
= $31,000
Amount to be credited to Treasury stock on November 1 = Number of shares sold x Cost price per share
= 1,000 x 25
= $25,000
Amount to be credited to Paid in capital from treasury stock on November 1 = Number of shares sold x (Selling price per share - Cost price per share)
= 1,000 x (31 - 25)
= $6,000
Cash proceeds from sale of treasury shares on November 25 = 4,000 x 20
= $80,000
Amount to be credited to Treasury stock on November 25 = Number of shares sold x Cost price per share
= 4,000 x 25
= $100,000
Amount to be debited to Paid in capital from treasury stock on November 25 = $6,000
Amount to be debited to Retained earnings on November 25 = $14,000

Date	General Journal	Debit	Credit
October 11	Treasury stock	$125,000
	Cash		$125,000
	( To record purchase of shares)
November 1	Cash	$31,000
	Treasury stock		$25,000
	Paid in capital from treasury stock		$6,000
	( To record sales of shares)
November 25	Cash	$80,000
	Paid in capital from treasury stock	$6,000
	Retained earnings	$14,000
	Treasury stock		$100,000
	( To record sale of shares)

Kindly comment if you need further assistance.

Thanks‼!