Question

Marigold Company's balance sheet shows: Common stock, $20 par Paid-in capital in excess of par Retained earnings $3,200,000 1,010,000 790,000 Record the following transactions by the cost method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no ent "No Entry" for the account titles and enter o for the amounts.) (a) (b) (c) Bought 7,800 shares of its common stock at $36 a share. Sold 4,100 treasury shares at $38 a share. Sold 1,900 shares of treasury stock at $31 a share. No. Account Titles and Explanation Debit Credit (a) (b) (c)

Answer 1

Solution

No	General journal	Debit	Credit
(a)	Treasury stock	$ 280,800.00
	Cash		$ 280,800.00
	(To record purchase of treasury stock)
(b)	Cash	$ 155,800.00
	Treasury stock		$      8,200.00
	Paid in capital from sale of treasury stock		$ 147,600.00
	(To record Sale of treasury stock)
(c )	Cash	$    58,900.00
	Paid in capital from sale of treasury stock	$      8,200.00
	Retained earnings	$      1,300.00
	Treasury stock		$    68,400.00
	(To record Sale of treasury stock)

The gain on sale of treasury stock is credited to "Paid in capital from sale of treasury stock account". This balance is used to setoff loss if any on loss on sale of treasury stock . If loss on sale of treasury stock is more than current balance in Paid in capital from sale of treasury stock account then the remaining loss is debited to retained earnings.