In: Accounting
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
Blossom Company
Journal Entries
Account Titles and Explanation |
Debit |
Credit |
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Treasury Stock |
$245,000 |
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Cash |
$245,000 |
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(To record purchase of5,000 shares from stockholders) |
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Cash |
$80,600 |
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Treasury Stock |
$75,950 |
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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) |
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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) |
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Cash |
$77,900 |
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Paid in capital treasury stock |
$1,550 |
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Retained Earnings |
$13,650 |
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Treasury stock |
$93,100 |
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(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