In: Accounting
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, 260 million shares at $1 par $ 260
Paid-in capital—excess of par 2,080
Paid-in capital—share repurchase 2
Retained earnings 1,600
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 8 million shares at $12 per share.
On July 9, 2021, the corporation sold 3 million shares at $14 per share.
On November 14, 2023, the corporation sold 3 million shares at $9 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.
Prepare the entries for both the purchase and subsequent resale for the above transactions of the shares assuming the shares are retired. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
No | Date | General Journal | Debit | Credit |
---|---|---|---|---|
A | February 05, 2021 | Treasury stockselected answer incorrect | 96 incorrect | |
Cashselected answer incorrect | 96 incorrect | |||
B | July 09, 2021 | No Transaction Recorded | ||
C | November 14, 2023 | No Transaction Recorded |
(1A Journal Entries): | Amount in Millions | ||
Date | Account Titles And Explanation | Debit | Credit |
15-Feb-21 | |||
Retired | Common stock (8 Million shares x $1 par) | $ 8.00 | |
Paid-in capital—excess of par (8 Million shares x $8) | $ 64.00 | ||
Retained earnings (difference) | $ 22.00 | ||
Paid-in capital—share repurchase | $ 2.00 | ||
Cash (8 Million Shares x $12) | $ 96.00 | ||
Average paid-in capital-excess of par is $8 per share ($2080 ÷ 260 shares) | |||
9-Jul-21 | Cash (3 Million Shares x $14) | $ 42.00 | |
Common stock (3 Million shares x $1 par) | 3 | ||
Paid-in capital—excess of par (difference) | $ 39.00 | ||
14-Nov-23 | Cash (3 Million Shares x $9) | $ 27.00 | |
Common stock (3 Million shares x $1 par) | 3 | ||
Paid-in capital—excess of par (difference) | $ 24.00 | ||
(1B Journal Entries): | |||
Accounted for as treasury stock | |||
15-Feb-21 | Treasury stock (8 million shares x $12) | $ 96.00 | |
Cash (8 Million Shares x $12) | $ 96.00 | ||
9-Jul-21 | Cash (3 Million Shares x $14) | $ 42.00 | |
Paid-in capital—sh. Repurchase | $ 6.00 | ||
Treasury stock (3 million shares x $12) | $ 36.00 | ||
Nov 14, 2020 | Cash (3 Million Shares x $9) | $ 27.00 | |
Paid-in capital—sh. Repurchase (2+6) | $ 8.00 | ||
Retained Earnings | $ 1.00 | ||
Treasury stock (3 million shares x $12) | $ 36.00 | ||
2) | Amount in Millions | ||
SHARES RETIRED | TREASURY STOCK | ||
Paid-in capital: | |||
Common stock, $1 par (260 - 8 + 3 + 3) Million | $ 258.00 | $ 260.00 | |
Paid-in capital—excess of par (2080 - 64 + 39 + 24) | $ 2,079.00 | $ 2,080.00 | |
Paid-in capital—share repurchase | $ - | $ - | |
Retained earnings (1600 -22) | $ 1,578.00 | $ 1,599.00 | |
Less: treasury stock, $2 m shares x $12 (at cost) | $ (24.00) | ||
Total shareholders’ equity | $ 3,915.00 | $ 3,915.00 | |