Question
In: Accounting
Treasury Stock The Stockholders' Equity section of Zavala Industries' balance sheet on January 1, 2017, appeared...
Treasury Stock
The Stockholders' Equity section of Zavala Industries' balance sheet on January 1, 2017, appeared as follows:
| Common stock, $10 par, 10,000 shares issued and outstanding | $100,000 |
| Additional paid-in capital | 50,000 |
| Retained earnings | 80,000 |
| Total stockholders’ equity | $230,000 |
Required:
1. Identify and analyze the effect of each transaction.
The following transactions occurred during 2017:
a. Reacquired 1,800 shares of common stock at $20
per share on July 1.
| Activity | Financing |
| Accounts | Cash Decrease, Treasury Stock Increase |
| Statement(s) | Balance Sheet only |
Feedback
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | ||||||||||||||
| Stockholders' | Net | ||||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | ||||||
| Cash | |||||||||||||||
Feedback
b. Reacquired 600 shares of common stock at $18 per share on August 1.
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | ||||||||||||||
| Stockholders' | Net | ||||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | ||||||
2. Assume that the company resold the shares of
treasury stock at $28 per share on October 1.
The resale price of the treasury stock is $67,200, which when
compared to its original cost, yielded in the
amount of $. This is shown on the balance sheet as
a(n) in the account.
Solutions
Expert Solution
| 1. a and b | |
| Activity | Financing |
| Accounts | Cash decrease, treasury stock increase |
| Statements | Balance sheet only |
| Activity | Financing |
| Accounts | Cash decrease, treasury stock increase |
| Statements | Balance sheet only |
| Balance sheet | Income statement | ||||||||
| Assets | = | Liabilities | + | Stockholders' equity | Revenues | - | Expenses | = | Net income |
| Cash | Treasury stock | ||||||||
| -36,000 | -36,000 | ||||||||
| Balance sheet | Income statement | ||||||||
| Assets | = | Liabilities | + | Stockholders' equity | Revenues | - | Expenses | = | Net income |
| Cash | Treasury stock | ||||||||
| -10,800 | -10,800 |
2.
| Resale price | $ 67,200 |
| Less: Purchase price (36,000+10,800) | -46,800 |
| Paid in capital from sale of treasury stock | $ 20,400 |
The resale price of the treasury stock is $67,200, which when compared to its original cost, yielded from resale of treasury stock in the amount of $20,400. This $20,400 is shown on the balance sheet as a(n) paid in capital from sale of treasury stock in the stockholders' equity account.
ekkarill92 answered 2 years agoRelated Solutions
Treasury Stock The Stockholders' Equity section of Zavala Industries' balance sheet on January 1, 2017, appeared...
Treasury Stock
The Stockholders' Equity section of Zavala Industries' balance
sheet on January 1, 2017, appeared as follows:
Common stock, $10 par, 10,000 shares issued and
outstanding
$100,000
Additional paid-in capital
50,000
Retained earnings
80,000
Total stockholders’ equity
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