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

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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 1 year ago

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