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Todd's 12-31-14 balance sheet reported:          Common stock outstanding: 600,000 shares, par $1 per share                 &nbs

  1. Todd's 12-31-14 balance sheet reported:

         Common stock outstanding: 600,000 shares, par $1 per share                                                                                            $600,000

         Paid-in capital in excess of par value                                                                                                                                       2,400,000

         Retained earnings                                                                                                                                                                      30,000,000

The following transactions occurred this year:

  1. During February 2015, Todd purchased 120,000 shares of its common stock and paid $15 per share. This was Todd’s first purchase of treasury stock.
  2. During August 2015, Todd purchased another 30,000 shares of its common stock and paid $18 per share.
  3. During September 2015, Todd purchased another 50,000 shares of its common stock and paid $17 per share.
  4. During December 2015, Todd sold 50,000 of the treasury shares for $20 per share.

Assume Todd uses a weighted average method to account for the cost of treasury shares it reissues. Todd rounds any per share calculation amounts to the nearest penny. Prepare the entry for each of these transactions under the cost method of accounting for treasury stock.

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Answer #1
Date Journal Entry Dr. ($) Cr.($)
Feb-15 Treasury stock (120000 shares * $15) 1800000
To Cash 1800000
(being repurchase of shares)
Aug-15 Treasury stock (30000 shares * $18) 540000
To Cash 540000
(being repurchase of shares)
Sep-15 Treasury stock (50000 shares * $17) 850000
To Cash 850000
(being repurchase of shares)
Dec-15 Cash (50000 shares * $20) 1000000
To Treasury stock (average cost $16 * 50000 shares) 800000
To Additional-paid in capital - treasury stock (difference) 200000
(reissue of treasury shares at weighted average cost $16 per share)
calculation of average cost (amount $) treasury stock value number of treasury shares
120000 shares * $15 1800000 120000
30000 shares * $18 540000 30000
50000 shares * $17 850000 50000
total 3190000 200000
price per share (treasury stock value / number os treasury share) 16.0
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