Question

ABC Company is authorized to issue 100,000 shares of its $10 par value common stock and as of February 1 had 25,000 shares issued and outstanding. On March 1, ABC bought 1,000 of its shares for the treasury at $25 each. Required—Prepare the journal entries that ABC should have made to record the transactions described in each of the following independent scenarios: Scenario #1 (1) On March 11, ABC issued 100 of the treasury shares at $30 each. (2) On March 21, ABC issued 100 of the treasury shares at $22 each. Scenario #2 (1) On March 11, ABC issued 100 of the treasury shares at $26 each. (2) On March 21, ABC issued 100 of the treasury shares at $22 each.

Answer 1

• Entry on 1 Mar under both scenarios are optional and can be ignored.
• Scenario #1

Date	Accounts title	Debit	Credit	Working
01-Mar	Treasury Stock	$25,000		[1000 shares x $25 cost]
	Cash		$25,000	[1000 shares x $25 cost]
	(Treasury stock purchased)
11-Mar	Cash	$3,000		[100 shares x $30]
	Treasury Stock		$2,500	[100 shares x $25 cost]
	Paid in Capital from treasury stock		$500	[100 shares x $5]
	(Treasury stock re issued)
21-Mar	Cash	$2,200		[100 shares x $22]
	Paid in Capital from treasury stock	$300		[100 shares x $3]
	Treasury Stock		$2,500	[100 shares x $25 cost]
	(Treasury stock re issued)

• Scenario 2

Date	Accounts title	Debit	Credit	Working
01-Mar	Treasury Stock	$25,000		[1000 shares x $25 cost]
	Cash		$25,000	[1000 shares x $25 cost]
	(Treasury stock purchased)
11-Mar	Cash	$2,600		[100 shares x $26]
	Treasury Stock		$2,500	[100 shares x $25 cost]
	Paid in Capital from treasury stock		$100	[100 shares x $1]
	(Treasury stock re issued)
21-Mar	Cash	$2,200		[100 shares x $22]
	Paid in Capital from treasury stock	$100		[100 shares x $1]
	Retained Earnings	$200		[Balancing amount]
	Treasury Stock		$2,500	[100 shares x $25 cost]
	(Treasury stock re issued)