Question
In: Accounting
National Supply’s shareholders’ equity included the following accounts at December 31, 2020: Shareholders' Equity Common stock,...
National Supply’s shareholders’ equity included the following accounts at December 31, 2020:
Shareholders' Equity
Common stock, 5 million shares at $1 par $ 5,000,000
Paid-in capital—excess of par 30,000,000
Retained earnings 98,500,000
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, 2021 Reacquired 480,000 shares at $9 per share.
February 17, 2022 Reacquired 480,000 shares at $6.50 per share.
November 9, 2023 Sold 335,000 shares at $8 per share (assume FIFO cost).
2. Prepare the shareholders’ equity section of National Supply’s balance sheet at December 31, 2023, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $20 million in 2021, $22 million in 2022, and $24 million in 2023. No dividends were paid during the three-year period.
Solutions
Expert Solution
| 1 | (a) Retired | ||||||||
| Avaerage paid-in capital-excess of par=Paid-in capital in excess of par/Number of shares=30000000/5000000=$ 6 per share | |||||||||
| No. | Date | General journal | Debit | Credit | |||||
| 2021 | |||||||||
| a. | Feb. 5 | Common stock | (480000*1) | 480000 | |||||
| Paid-in capital in excess of par | (480000*6) | 2880000 | |||||||
| Retained earnings | (plug) | 960000 | |||||||
| Cash | (480000*9) | 4320000 | |||||||
| (Reacquired 480000 shares at $ 9 per share) | |||||||||
| 2022 | |||||||||
| b. | Feb. 17 | Common stock | (480000*1) | 480000 | |||||
| Paid-in capital in excess of par | (480000*6) | 2880000 | |||||||
| Retained earnings | (plug) | 240000 | |||||||
| Cash | (480000*6.5) | 3120000 | |||||||
| (Reacquired 480000 shares at $ 6.50 per share) | |||||||||
| 2023 | |||||||||
| c. | Nov. 9 | Cash | (335000*8) | 2680000 | |||||
| Common stock | (335000*1) | 335000 | |||||||
| Paid-in capital in excess of par | (plug) | 2345000 | |||||||
| (Sold 335000 shares at $ 8 per share) | |||||||||
| (b) Viewed as treasury stock | |||||||||
| Sl no. | Date | Account titles and explanation | Debit | Credit | |||||
| 2021 | |||||||||
| a. | Feb. 5 | Treasury stock | (480000*9) | 4320000 | |||||
| Cash | 4320000 | ||||||||
| (Reacquired 480000 shares at $ 9 per share) | |||||||||
| 2022 | |||||||||
| b. | Feb. 17 | Treasury stock | (480000*6.5) | 3120000 | |||||
| Cash | 3120000 | ||||||||
| (Reacquired 480000 shares at $ 6.50 per share) | |||||||||
| 2023 | |||||||||
| c. | Nov. 14 | Cash | (335000*8) | 2680000 | |||||
| Retained earnings | (Plug) | 335000 | |||||||
| Treasury stock | (335000*9) | 3015000 | |||||||
| (Sold 335000 shares at $ 8 per share)-FIFO method used | |||||||||
| 2 | Retired (a) | Treasury stock (b) |
|||||||
| Paid-in capital: | |||||||||
| Common stock, 4375000 shares at $ 1 par | (Note:1) | 4375000 | |||||||
| Common stock, 5000000 at $ 1 par | 5000000 | ||||||||
| Paid-in capital in excess of par | (Note:2) | 26585000 | 30000000 | ||||||
| Retained earnings | (Note:3) | 97780000 | 98165000 | ||||||
| Total | 128740000 | 133165000 | |||||||
| Less: Treasury stock | (Note:4) | 0 | 4425000 | ||||||
| Total shareholder's equity | 128740000 | 128740000 |
ekkarill92 answered 1 year agoRelated Solutions
National Supply’s shareholders’ equity included the following accounts at December 31, 2020: Shareholders' Equity Common stock,...
National Supply’s shareholders’ equity included the following
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Shareholders' Equity
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Paid-in capital—excess of par
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Retained earnings
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Required:
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the entries for each of the transactions under each of two separate
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treasury stock.
February 15, 2021
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