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In: Accounting

How do i calculate Paid in capital common and retained earnings when stock is sold below...

How do i calculate Paid in capital common and retained earnings when stock is sold below value.

I know when i journal its

a debit to cash   a debit to paid in capital treasury stock, a debit to retained earnings and a credit to treasury stock common. I just can't fiure out how to calculate how much goes to retained earings and how much goes to paid in capital treasury stock. please help.

Solutions

Expert Solution

lets take an example
Treasury stock purchased 1000 shares at $20
sold 400 shares at $25
sold 600 shares at $15
Accounting titles & Explanations Debit Credit
Treasury stock 20,000
cash (1000*20) 20,000
Cash (400*25) 10000
Treasury stocj (400*20) 8,000
Pain in capital in excess from Treasury stock 2,000
Cash (600*15) 9000
Paid in capital in exces from Treasury stock 2,000
retained earnings 1,000
Treasury stock (600*20) 12,000
Thus we see in last entry the retained earnings is debited for the balance amount
that is 12,000-9000-2000 = 1,000
so in case paid in capital in excess from treasury stock is sufficient than we don't
need retained earnings , but if there is some left even after debiting paid in capital in excess from Treasury stock then we need to debit the retained
earnings with the amount that would balance the accounts

ekkarill92 answered 1 year ago
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