Question

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On May 27, Mama Mia Inc. reacquired 6,700 shares of its common stock at $19 per share. On August 3, Mama Mia sold 2,800 of the reacquired shares at $22 per share November 14, Mama Mia sold the remaining shares at $18 per share. Journalize the transactions of May 27, August 3, and November 14. For a compound transaction, if an amount box does not require an entry, leave it blank. May 27 Aug. 3 Nov. 14 Using the following accounts and balances, prepare the Stockholders' Equity section of the balance sheet using Method 1 of Exhibit 8. 30,000 shares of common stock authorized, and 2,000 shares have been reacquired. Common Stock, $70 par Paid-In Capital from Sale of Treasury Stock Paid-In Capital in Excess of Par-Common Stock Retained Earnings Treasury Stock $1,470,000 29,000 378,000 853,000 13,000 Stockholders' Equity Paid-In Capital Total Paid-in Capital Total Total Stockholders' Equity

Answer 1

Solution

Mama Mia

Journal Entries

Date	Account Titles and Explanation	Ref. No.	Debit	Credit
May 27,	Treasury Stock		$127,300
	Cash			$127,300
	(To record reacquisition of 6,700 shares at $19 each)
Aug 3,	Cash		$61,600
	Paid-in Capital in Excess of Par			$8,400
	Treasury Stock			$53,200
	(To record sale of reacquired shares at $22 each)
Nov 14,	Cash		$70,200
	Paid-in Capital in Excess of Par		$3,900
	Treasury Stock			$74,100
	(To record sale of reacquired shares at $18 each)

Computations:

Cost of reacquired shares on May 27 = 6,700 x $19 = $127,300

Cost of sale of 2,800 reacquired shares on Aug 3, = 2,800 x $19 = $53,200

Sale value = 2,800 x $22 = $61,600

Paid-in Capital in excess of par = 2,800 x (22 -19) = $8,400

Treasury stock = 2,800 x 19 = $52,200

Cost of sale of remaining treasury stock = 6,700 – 2,800 = 3,900 shares

Sale value = 3,900 x $18 = $70,200

Paid-in capital in excess of par (debit)      = $3,900

Cost of shares = 3,900 x $19 = $74,100

Stockholders’ Equity

	Stockholders' Equity
Paid-in Capital
Common Stock $70 par, shares authorized 30,000; 21,000 issued and outstanding	$1,470,000
Paid in Capital from sale of treasury stock	$33,500
Paid-in Capital in excess of Par - Common Stock	$378,000
Total paid-in Capital	$1,881,500
Retained Earnings	$853,000
Treasury Stock	($13,000)
Total Stockholders' Equity	$2,721,500

Note:

Paid in capital from sale of treasury stock –

Beg. Balance = $29,000

Add: Excess of sale value over cost for 2,800 treasury shares = $8,400

Less: excess of cost over sale value for 3,900 treasury shares = ($3,900)

Paid in capital from sale of treasury stock, ending balance = $33,500