Question

During the year the following selected transactions affecting stockholders' equity occurred for Orlando Corporation: a. Apr. 1 Repurchased 260 shares of the company's own common stock at $30 cash per share. b. Jun. 14 Sold 130 of the shares purchased on April 1 for $35 cash per share. c. Sept. 1 Sold 120 of the shares purchased on April 1 for $25 cash per share.

Answer 1

Answer:

April 1

DR Treasury Stock $7,800

CR Cash $7,800

(To record purchase of Treasury Stock)

Working

Treasury Stock = 260 shares * $30

= $7,800

June 14

DR Cash $4,550

CR Treasury Stock $ 3,900

CR Additional Paid-in Capital $ 650

(To record sale of Treasury Stock)

Working

When the stock sold is higher or lower than the price it was purchased or issued for, it is credited or debited to the Additional Paid-in Capital account respectively.

As the price it was sold for here was higher than what it was purchased for, the balance is credited.

Cash = 130 shares * $35

= $4,550

Treasury Stock = 130 * $30 (original price)

= $3,900

Additional Paid-in Capital = 4,550 - 3,900

= $650

Sept 1.

DR Cash $3,000

DR Additional Paid-in Capital $600

CR Treasury Stock $3,600

(To record sale of Treasury Stock)

Working

Price stock was sold for is less than the amount it was purchased so the balance will be debited to the Additional Paid-in Capital account.

Cash = 120 * 25

= $3,000

Treasury Stock = 120 * 30

= $3,600

Additional Paid-in Capital = 3,600 - 3,000

= $600