Question

Elroy Corporation repurchased 4,000 shares of its own stock for $30 per share. The stock has a par of $10 per share. A month later Elroy resold 900 shares of the treasury stock for $32 per share.
Required:
a. Record the two events in general journal format. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. What is the balance of the treasury stock account after these transactions?

Answer 1

Answer:

a.

The journal entry is as follows which is shown below:

b.

Balance in Treasury stock is $93,000

Explanation:

a.

The journal entries which is to be recorded as:

Shares repurchased for $30 per share:

Treasury Stock A/c....................Dr     $120,000

             Cash A/c.............................Cr    $120,000

Shares resold for $32 per share:

Cash A/c.........................................................Dr    $28,00

    Treasury Stock A/c..............................................Cr     $27,000

     Paid in capital from Treasury Stock A/c........Cr    $1,800

Working Note:

Treasury Stock = Number of shares × Rate per share

= 4,000 × $30

= $120,000

Cash = Number of shares × Rate per share

= 900 × $32

= $28,800

Treasury Stock = Number of shares × Rate per share

= 900 × $30

= $27,000

Paid in capital from Treasury Stock = Cash - Treasury Stock

= $28,800 - $27,000

= $1,800

b.

Balance in Treasury Stock is computed as:

Balance in Treasury stock = Purchase of treasury stock - Cost of treasury stock sold

= $120,000 - $27,000

= $93,000