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On October 10, the stockholders’ equity of Sherman Systems appears as follows. Common stock–$10 par value,...

On October 10, the stockholders’ equity of Sherman Systems appears as follows. Common stock–$10 par value, 81,000 shares authorized, issued, and outstanding $ 810,000 Paid-in capital in excess of par value, common stock 261,000 Retained earnings 936,000 Total stockholders’ equity $ 2,007,000 1. Prepare journal entries to record the following transactions for Sherman Systems. Purchased 5,900 shares of its own common stock at $34 per share on October 11. Sold 1,225 treasury shares on November 1 for $40 cash per share. Sold all remaining treasury shares on November 25 for $29 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.

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Expert Solution

we will record journals first

Date Accounts debit Credit
Oct 11 Treasury stock, common $200,600[5,900*$34]
Cash $200,600
Nov-01 Cash [1225*$40] $49,000
Treasury stock [1,225*$34] $41,650
Paid in capital, treasury stock $7,350
Nov 25 Cash[$29*4,675(5,900-1,225)] $135,575
Paid in capital,treasury stock $7,350
Retained earnings $16,025[$158,950-$135,575-7,350]
Treasury stock[$34*4,675] $158,950

revised shareholder's equiy section after oct 11 purchase

Amount
Common stock $10 $810,000
Paid in capital in excess of par value $261,000
Total contributed capital $1,071,000
Retained earnings $936,000
Total $2,007,000
Less: cost of treasury stock -$200,600
Total shareholder's equity $1,806,400

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