Question

Problem 15-5 Before Ayayai 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 Retained Earnings $108,600 $282,900 $75,300 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 indente amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amount.) (a) Bought 390 shares of treasury stock at $39 per share (b) Bought 290 shares of treasury stock at $45 per share. (c) Sold 330 shares of treasury stock at $41 per share. (d) Sold 110 shares of treasury stock at $37 per share. No. Account Titles and Explanation Debit Credit

Answer 1

Treasury Stock is accounted at cost price under cost method and not by par value.

If treasury stock is sold at price above cost, difference between cash received and cost of shares is credited to Paid in Capital from Treasury Stock account.

If treasury stock is sold at price below cost, difference between cash received and cost of shares is debited to Paid in Capital from Treasury Stock account, if there is any balance in it already and remainder to Retained Earnings account.