Question

Exercise 11-12 Recording and reporting treasury stock transactions LO P3 On October 10, the stockholders' equity of Sherman Systems appears as follows. Common stock-$10 par value, 87,000 shares authorized, issued, and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 870,000 291,000 984,000 $2,145,000 1. Prepare journal entries to record the following transactions for Sherman Systems. a. Purchased 6,500 shares of its own common stock at $40 per share on October 11. b. Sold 1,375 treasury shares on November 1 for $46 cash per share. c. Sold all remaining treasury shares on November 25 for $35 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.

Answer 1

Date Credot Account title & Explanation Debit oct 11 Telaxay stock, common $260,000 (6,500 x 140) $260,000 Cash (To record pachase of own Shares) Eash (1,375X $46) Tre 863,250 Now I $55,ooo asury stack, common (1375x840) Paind in capital, Tre asuay stock $8,250 (To accord sale of treasury stock) $20 5000 Nov 25 Cash (16,500 - 1,375) * $ 35, ) ) $28125 Papal din capital , Treasury $ 8,250 stak Retained earnings $168,625 Treasury stock, common (5,125x840) (to recold gale of treasury stock)

Revised Equity section of Balance sheet Atty oct 31 common stock $10 par $870,000 paid in capital in Excess of Pasvalue, $ 291,000 Common stock $1,161,000 Total contributed Capital $984, boo Retained earnings Total $2,145,000 less: cost of treasury stock ($260,000) Total stockholders sanity $1,885,000