Blossom Company purchased from its stockholders 5,000 shares of its own previously issued stock for $245,000....

Blossom Company purchased from its stockholders 5,000 shares of its own previously issued stock for $245,000. It later resold 1,550 shares for $52 per share, then 1,550 more shares for $47 per share, and finally 1,900 shares for $41 per share.

Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock

Expert Solution

Blossom Company

Journal Entries

Account Titles and Explanation	Debit	Credit
Treasury Stock	$245,000
Cash		$245,000
(To record purchase of5,000 shares from stockholders)

Cash	$80,600
Treasury Stock		$75,950
Paid-in Capital in excess of Treasury Stock		$4,650
(To record sale of 1,550 shares at $52, the excess over purchase price $3 (52 -49) is paid-in capital)

Cash	$72,850
Paid-in Capital in excess of Treasury Stock	$3,100
Treasury Stock		$75,950
(To record sale of 1,550 shares at $47, the difference $3,100 =1,550 x $2 ($49 - $47)per share debited to paid-in capital treasury stock)

Cash	$77,900
Paid in capital treasury stock	$1,550
Retained Earnings	$13,650
Treasury stock		$93,100
(to record sale of 1,900 shares at $41 per share, the excess of purchase price debited to paid-in capital and partly debited to retained earnings; $49 -$41 = $8 per share, 8 x 1,900 = 15,200)

Notes:

Purchase price of treasury stock = $245,000/5,000 = $49

Paid-in capital, treasury stock = $52 - $49 = $3 per share, 3 x 1,550 shares = $4,650

Paid in capital treasury stock = $49 - $47 = $2 per share, 2 x 1,550 = $3,100

Paid in capital treasury stock = $49 - $41 = $8 per share

Partly debited to paid-in capital = 8 x 1,900 shares = $15,200

Less: paid in capital treasury stock = $4,650 - $3,100 = $1,550

Remaining paid in capital, treasury stock debited to retained earnings = $13,650

ekkarill92 answered 2 years ago

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