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.

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