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Brief Exercise 18-7 (Algo) Treasury stock [LO18-5] ok The Jennings Group reacquired 3 million of its shares at $58 per share
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Answer #1

Number of treasury shares acquired = 3,000,000

Cost per share = $58

Last year, 2,000,000 shares were sold at $59 per share.

Amount credited to paid in capital from treasury stock = Number of shares sold x (Selling price per share - Cost per share)

= 2,000,000 x (59-58)

= $2,000,000

Remaining 1,000,000 shares are sold at $55 per share.

Following journal entry will be made to record the sale of 1,000,000 shares:

General Journal Debit Credit
Cash 55,000,000
Paid in capital from treasury stock 2,000,000
Retained earnings 1,000,000
Treasury stock 58,000,000

Paid in capital from Treasury stock will be debited by $2,000,000 since there is a credit balance of $2,000,000 in paid in capital from treasury stock.

Retained earnings will decline by 1 million.

Kindly comment if you need further assistance. Thanks‼!

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