Question

On October 10, the stockholders’ equity of Sherman Systems appears as follows: Common stock–$10 par value, 72,000 shares authorized, issued, and outstanding $ 720,000 Paid-in capital in excess of par value, common stock 216,000 Retained earnings 864,000 Total stockholders’ equity $ 1,800,000 1. Prepare journal entries to record the following transactions for Sherman Systems.
a. Purchased 5,000 shares of its own common stock at $25 per share on October 11.
b. Sold 1,000 treasury shares on November 1 for $31 cash per share.
c. Sold all remaining treasury shares on November 25 for $20 cash per share.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

a. Treasury Stock A/c Dr $125,000     (5,000 shares × $25)

           To Cash A/c                 $125,000

(Being treasure stock is purchased)

b. Cash A/c  Dr $31,000                       (1,000 shares × $31)

       To Treasury Stock A/c $25,000  (1,000 shares × $25)

       To Paid in capital - Treasury stock $6,000

(Being treasury stock is sold at higher price and the remaining amount would be credited to the paid in capital account)

c.  Cash A/c  Dr $80,000                     (4,000 shares × $20)

    Paid in capital - Treasury stock $6,000

    Retained Earnings A/c Dr $14,000

                    To Treasury Stock A/c $100,000    (4,000 shares × $25)

(Being treasury stock is sold at lower price and the remaining amount would be debited to the retained earning account)