Question
In: Accounting
National Supply’s shareholders’ equity included the following accounts at December 31, 2017: Shareholders' Equity ($ in...
National Supply’s shareholders’ equity included the following
accounts at December 31, 2017:
|
Shareholders' Equity |
($ in millions) |
|
|
Common stock, 3 million shares at $1 par |
$ |
3,000,000 |
|
Paid-in capital—excess of par |
9,000,000 |
|
|
Retained earnings |
71,500,000 |
|
Required:
1. National Supply reacquired shares of its common
stock in two separate transactions and later sold shares. Prepare
the entries for each of the transactions under each of two separate
assumptions: the shares are (a) retired and (b) accounted for as
treasury stock.
|
February 15, 2018 |
Reacquired 120,000 shares at $6 per share. |
|
February 17, 2019 |
Reacquired 120,000 shares at $3.50 per share. |
|
November 9, 2020 |
Sold 65,000 shares at $5 per share (assume FIFO cost). |
REQUIRED 1A
Feb 15 Record the repurchase of shares on February 15, 2018 for retirement.
Feb 17 Record the repurchase of shares on February 17, 2019 for retirement.
Nov 9 Record the sale of shares on November 9, 2020.
|
No |
Date |
General Journal |
Debit |
Credit |
|
1 |
February 15, 2018 |
Common stock |
||
|
Paid-in capital—excess of par |
||||
|
Retained earnings |
||||
|
Cash |
||||
|
2 |
February 17, 2019 |
Common stock |
||
|
Paid-in capital—excess of par |
||||
|
Paid-in capital—share repurchase |
||||
|
Cash |
||||
|
3 |
November 09, 2020 |
Cash |
||
|
Common stock |
||||
|
Paid-in capital—excess of par |
REQUIRED 1B
Feb 15 Record the repurchase of shares on February 15, 2018 and accounted as treasury stock.
Feb 17 Record the repurchase of shares on February 17, 2019 and accounted as treasury stock.
Nov 09 Record resale of treasury shares on November 9, 2020 (assumes FIFO cost).
|
No |
Date |
General Journal |
Debit |
Credit |
|
1 |
February 15, 2018 |
Treasury stock |
||
|
Cash |
||||
|
2 |
February 17, 2019 |
Treasury stock |
||
|
Cash |
||||
|
3 |
November 09, 2020 |
Cash |
||
|
Retained earnings |
||||
|
Treasury stock |
REQUIRED 2
Prepare the shareholders’ equity section of National Supply’s balance sheet at December 31, 2020, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $11 million in 2018, $12 million in 2019, and $13 million in 2020. No dividends were paid during the three-year period. (Enter your answers in whole dollars.)
|
|||||||||||||||||||||||||
Solutions
Expert Solution
| Answer 1-a. | ||||
| Journal Entry | ||||
| Date | Particulars | Dr. Amt. | Cr. Amt. | |
| 15-Feb-18 | Common Stock | 120,000.00 | 120,000 Shares X $1 | |
| Paid in Capital - Excess of Par | 360,000.00 | 120,000 Shares X $3 | ||
| Retained Earnings | 240,000.00 | 120,000 Shares X $2 | ||
| Cash | 720,000.00 | 120,000 Shares X $6 | ||
| (To record the purchase of common Stock) | ||||
| 17-Feb-19 | Common Stock | 120,000.00 | 120,000 Shares X $1 | |
| Paid in Capital - Excess of Par | 300,000.00 | 120,000 Shares X $2.50 | ||
| Cash | 420,000.00 | 120,000 Shares X $3.50 | ||
| (To record the purchase of common Stock) | ||||
| 9-Nov-20 | Cash | 325,000.00 | 65,000 Shares X $5 | |
| Common Stock | 65,000.00 | 65,000 Shares X $1 | ||
| Paid in Capital - Share Repurchase | 260,000.00 | 65,000 Shares X $4 | ||
| (To record the sale of common Stock) | ||||
| Answer 1-b. | ||||
| Journal Entry | ||||
| Date | Particulars | Dr. Amt. | Cr. Amt. | |
| 15-Feb-18 | Treasury Stock | 720,000.00 | 120,000 Shares X $6 | |
| Cash | 720,000.00 | 120,000 Shares X $6 | ||
| (To record the purchase of Treasury Stock) | ||||
| 17-Feb-19 | Treasury Stock | 420,000.00 | 120,000 Shares X $3.50 | |
| Cash | 420,000.00 | 120,000 Shares X $3.50 | ||
| (To record the purchase of Treasury Stock) | ||||
| 9-Nov-20 | Cash | 325,000.00 | 65,000 Shares X $5 | |
| Retained Earnings | 65,000.00 | 65,000 Shares X $1 | ||
| Treasury Stock | 390,000.00 | 65,000 Shares X $6 | ||
| (To record the sale of Treasury Stock) | ||||
| Answer 2. | ||
| Shareholders' Equity | Retirement | Treasury stock |
| Paid-in Capital: | ||
| Common Stock | 2,825,000.00 | 3,000,000.00 |
| Paid in Capital - Excess of Par | 8,340,000.00 | 9,000,000.00 |
| Paid in Capital - Share Repurchase | 260,000.00 | - |
| Retained Earnings | 107,260,000.00 | 107,435,000.00 |
| Less: Treasury Stock | - | |
| Total Shareholders' Equity | 118,685,000.00 | 119,435,000.00 |
ekkarill92 answered 1 year agoRelated Solutions
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