Question

Problem 15-5

Before Carla Corporation engages in the treasury stock transactions listed below, its general ledger reflects, among others, the following account balances (par value of its stock is $30 per share).

Problem 15-12 Nash Company was formed on July 1, 2015. It was authorized to issue 296,200 shares of $10 par value common stock and 104,100 shares of 7% $25 par value, cumulative and nonparticipating preferred stock. Nash Company has a July 1–June 30 fiscal year. The following information relates to the stockholders’ equity accounts of Nash Company. Common Stock Prior to the 2017–2018 fiscal year, Nash Company had 114,200 shares of outstanding common stock issued as follows. 1. 89,000 shares were issued for cash on July 1, 2015, at $31 per share. 2. On July 24, 2015, 5,000 shares were exchanged for a plot of land which cost the seller $71,800 in 2009 and had an estimated fair value of $211,200 on July 24, 2015. 3. 20,200 shares were issued on March 1, 2016, for $41 per share. During the 2017–2018 fiscal year, the following transactions regarding common stock took place. November 30, 2017 Nash purchased 2,100 shares of its own stock on the open market at $42 per share. Nash uses the cost method for treasury stock. December 15, 2017 Nash declared a 5% stock dividend for stockholders of record on January 15, 2018, to be issued on January 31, 2018. Nash was having a liquidity problem and could not afford a cash dividend at the time. Nash’s common stock was selling at $48 per share on December 15, 2017. June 20, 2018 Nash sold 540 shares of its own common stock that it had purchased on November 30, 2017, for $25,000. Preferred Stock Nash issued 41,500 shares of preferred stock at $47 per share on July 1, 2016. Cash Dividends Nash has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2018, are shown below. Declaration Date Common Stock Preferred Stock 12/15/16 $0.30 per share $1 per share 6/15/17 $0.30 per share $1 per share 12/15/17 $1 per share No cash dividends were declared during June 2018 due to the company’s liquidity problems. Retained Earnings As of June 30, 2017, Nash’s retained earnings account had a balance of $666,300. For the fiscal year ending June 30, 2018, Nash reported net income of $39,900. Prepare the stockholders’ equity section of the balance sheet, for Nash Company as of June 30, 2018, as it should appear in its annual report to the shareholders.

Record the treasury stock transactions (given below) under the cost method of handling treasury stock; use the FIFO method for purchase-sale purposes. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(a)		Bought 370 shares of treasury stock at $39 per share.
(b)		Bought 310 shares of treasury stock at $43 per share.
(c)		Sold 350 shares of treasury stock at $41 per share.
(d)		Sold 100 shares of treasury stock at $37 per share.

Answer 1

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Solution to Problem 15-5

Carla Corporation
Journal Entries
Transaction	General journal	Debit	Credit
A	Cash	14,430
	Treasury Stock		14,430
	(To record Bought 370 shares of treasury stock at $39 per share.) (370*39)
B	Cash	13,330
	Treasury Stock		13,330
	(To record Bought 310 shares of treasury stock at $43 per share.) (310*43)
C	Cash (350*41)	14,350
	Paid in capital excess of par value - Treasury (350*(41-39))		700
	Treasury Stock (350*39)		13,650
	(To record Sold 350 shares of treasury stock at $41 per share.)
D	Cash (100*37)	3,700
	Paid in capital excess of par value - Treasury (4220-3700)	520
	Treasury Stock		4,220
	(To record Sold 100 shares of treasury stock at $37 per share.)

Calculation for Part D
From Transaction, A 20 treasury share and remaining 80 treasury share from transaction B are sold.
Transaction A (20*39)	$                780
Transaction B (80*43)	$            3,440
Cost of Treasury Stock sold	$            4,220