Question

Exercise 11-10 Recording and reporting treasury stock transactions LO P3

On October 10, the stockholders’ equity of Sherman Systems appears as follows.
  

Common stock–$10 par value, 94,000 shares authorized, issued, and outstanding	$	940,000
Paid-in capital in excess of par value, common stock		326,000
Retained earnings		1,040,000
Total stockholders’ equity	$	2,306,000

1. Prepare journal entries to record the following transactions for Sherman Systems.

1. Purchased 7,200 shares of its own common stock at $47 per share on October 11.
2. Sold 1,550 treasury shares on November 1 for $53 cash per share.
3. Sold all remaining treasury shares on November 25 for $42 cash per share.

2. Prepare the revised equity section of its balance sheet after the October 11 treasury stock purchase.

Answer 1

Journal entry :
1
Date	accounts & explanation	debit	credit
	Treasury Stock (7200*47)	$     338,400
	Cash		$     338,400
	(To record purchase of treasury stock)
	Cash (1550*53)	$       82,150
	Treasury Stock (1550*47)		$       72,850
	Paid in capital from sale of treasury stock		$         9,300
	(To record Sale of treasury stock)
	Cash (5650*42)	$     237,300
	Paid in capital from sale of treasury stock	$         9,300
	Retained earnings	$       18,950
	Treasury Stock (5650*47)		$     265,550
	(To record Sale of treasury Stock)

2
Revised equity section of balance sheet after October 11
Common Stock $10 par	$        940,000
Paid in capital in excess of par value, Common Stock	$        326,000
Total contributed capital	$     1,266,000
Retained earnings	$     1,040,000
Total	$     2,306,000
Less: Cost of treasury stock (7200*47)	-$        338,400
Total Stockholder's equity	$     1,967,600