Question

Journalize the following transactions of the Dot Corporation. Add formulas next to the accounts in the "explanation" area. Post to the accounts. 15.000x2= 20,000 -10,000 =12 Jan 2 Issued 15,000 shares of $2 par value common stock for $150,000. Common Stock Aug 5 Purchased 2,000 shares of its common stock for $15 per share for the treasury. 2,000x15 = 30,000 250,000 Sep 15) Sold 1,000 shares of treasury stock for $17 per share. 1000 x17517,00 30,00 Dec 17 Sold 1,000 treasury shares for $12 per share. 1000 x12-12.000 2,oou Dec 31 Issued 10,000 shares of $2 par value common stock for $20 per share. 2 10,000=20000 20X1000= 200000 Dec 31 Closed net income of $275,000. Paid-in Capital in Excess Date Explanation & Formulas Debit Credit of PV-Common Stock 1 1/2 Cash 1 150,000 375,000 L Common Stock , $2 er velve 30,000 120,000 L Paid-in Cash! Commy Shock 120,000 180,00 Treasury Stock 30,000 Cash 30,000 Treasury Stock 15 Cash 117000 30,-00 15.000 Treasury Stock 15,000 15oo Paid in Cesil! Tresury Stack 2,000 2/12/17 Cash 12,000 I Paidrin Canikl, Treasure Stock I 2 000 Retired Earnines Yes! 11,000 L Treasure Stuch / Paid-in Capital from 12/31 Cash 200,000 Treasury Stock I Comma Stock, 12 ur valve 20,000 2,000 2.000 Peidain Casill, Corner Stuck 780, SO. 12/31Income Summery 275.000 hekined Earnims 275, ovo + بدن 15 Retained Earnings 1,00 338,000 275

I don't understand the journal entries I circled. Can someone please explain.

Answer 1

Date	Explanation	Debit	Credit
September 15	Cash ( 1000 X $ 17)	$ 17,000
	Treasury stock ( 1000 X $ 15)		$ 15,000
	Paid in capital - Treasury stock {1000 X ( 17 - 15) }		$ 2,000

Explanation : At the time of purchase of common stock for treasury stock for each share $ 15 has been paid. So $ 15 is the cost of treasury stock.

When 1000 treasury stock sold @ $ 17 each, then $ 17 is considered as the sale price of the treasury stock.

Net gain per treasury stock sold is $ 17 - $ 15 = $ 2 which is transferred to paid in capital account.

Date	Description	Debit	Credit
December 17	Cash ( 1000 X $ 12)	$ 12,000
	Paid in capital - Treasury stock	$ 2,000
	Retained earnings { $ 15,000 - $ 12,000 } - $ 2,000	$ 1,000
	Treasury stock ( 1000 X $ 15)		$ 15,000

Explanation : cost of treasury stock is $ 15 per share.

The sale price of treasury stock is $ 12 per share.

Total loss on sale of treasury stock is { $ 15 - $ 12 } X 1000 = $ 3,000.

Out of which $ 2,000 has been settled by exhausting the existing balance of paid in capital - Treasury stock. Rest $ 1,000 of loss has been settled by debiting Retained earnings .