Cinders MarketingCinders Marketing Corporation reported the following? stockholders' equity at December 31? (adapted and in ?millions):...

Cinders MarketingCinders Marketing Corporation reported the following? stockholders' equity at December 31? (adapted and in ?millions):

During the next? year, Cinders MarketingCinders Marketingpurchased treasury stock at a cost of $28 million and resold treasury stock for $9 million? (this treasury stock had cost Cinders MarketingCinders Marketing $3 ?million).

Common stock.................................$281

Additional paid-in capital..................275

Retained Earnings............................2,129

Treasury Stock................................ (611)

Total Stockholders' Equity.................$2,074

1. Record the purchase and resale of Cinders Marketing'sCinders Marketing's treasury stock.

2. ?Overall, how much did? stockholders' equity increase or decrease as a result of the two? treasury-stock transactions?

Expert Solution

Formula sheet

A	B	C	D	E	F	G	H	I	J	K
2
3		1)
4		All amounts are in million $
5		Journal entry for purchase of treasury stock will be as follows:
6		Account	Debit	Credit
7		Treasury Stock	28
8		Cash		=D7
9
10		When treasury stock is sold, treasury shares account is credited at cost and rest will be credited as Paid in capital-Treasury Stock.
11
12		Journal entry for sale of treasury stock will be as follows:
13
14		Account	Debit	Credit
15		Cash	9
16		Treasury Stock (at cost)		3
17		Additional Paid in capital		=D15-E16
18
19		2)
20
21		Shareholders Equity Before treasury stock purchase and sale:
22		Common Stock	281
23		Additional Paid in Capital	275
24		Retained Earnings	2129
25		Treasury Stock	-611
26		Total shareholder's Equity	=SUM(D22:D25)
27
28		Shareholders Equity after treasury stock purchase and sale:
29		Common Stock	281
30		Additional Paid in Capital	=D23+E17
31		Retained Earnings	2129
32		Treasury Stock	=D25-D7+E16
33		Total shareholder's Equity	=SUM(D29:D32)
34
35		Change in Shareholders' Equity	=Shareholders' Equity After Transaction - Shareholders' Equity Before Transaction
36			=D33-D26	=D33-D26
37
38		Hence change in shareholders' equity due to transactions is	=D36	million
39

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