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The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts...

The shareholders’ equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2020:

Shareholders' Equity ($ in millions)
Common stock, 270 million shares at $1 par $ 270
Paid-in capital—excess of par 1,890
Paid-in capital—share repurchase 2
Retained earnings 1,700


Required:
1. During 2021, TNL Systems reacquired shares of its common stock and later sold shares in two separate transactions. Prepare the entries for both the purchase and subsequent resale of the shares assuming the shares are (a) retired and (b) viewed as treasury stock.

  1. On February 5, 2021, TNL Systems purchased 7 million shares at $11 per share.
  2. On July 9, 2021, the corporation sold 3 million shares at $13 per share.
  3. On November 14, 2023, the corporation sold 3 million shares at $8 per share.


2. Prepare the shareholders’ equity section of TNL Systems’ balance sheet at December 31, 2023, comparing the two approaches. Assume all net income earned in 2021–2023 was distributed to shareholders as cash dividends.

Solutions

Expert Solution

in million $
ans 1a
Date Accounst Title Dr Cr
05-Feb Common stock (7*$1) $7
Paid in capital excess of par (7*7) 49
Retained Eranings (bal fig) $21
Cash (7*11) 77
working Paid in capital excess of par 1890/270 7
09-Jul Cash (3*13) 39
Paid in capital excess of par 36
Common stock (3*1) 3
Nov-14 Cash (3*8) 24
Paid in capital excess of par 21
Common stock (3*1) 3
1B Treasury stock
05-Feb Treasury stock 77
Cash 77
09-Jul Cash (3*13) 39
Paid in capital share purchase 6
Treasury stock (11*3) 33
Nov-14 Cash (3*8) 24
Paid in capital share purchase (6+2) 8
Retained Earnings (bal fig) 1
Treasury stock (11*3) 33
ans 2 Shareholder equity $ inmilions
Retirement Treasury
Common stock 269 270
(270-(7-3-3)
Paid in capital excess of par $1,898 1890
(1890-49+36+21)
Paid in capital share purchase 2 0
Retained Earnings $1,679 1699
(1700-21) (1700-1)
Less: Treasury stock (1*11) -11
Total shareholder equity 3848 3848
If any doubt please comment'. Note answers are in million $

ekkarill92 answered 1 year ago
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