Answer:
a) Bought 400 shares of treasury stock at $40 per share:
Dr Treasury stock 16,000
Cr Cash 16,000
( to record the repurchased of 400 shares at $40 each)
b) Bought 290 shares of treasury stock at $45 per share:
Dr Treasury stock 13,050
Cr Cash 13,050
( to record the repurchased of 290 shares at $45 each)
c) Sold 370 shares of treasury stock at $42 per share:
Dr Cash 15,540
Cr Common stock 14,800
Cr Paid-in capital - common stock 740
( to record the sell of 370 shares repurchased at selling price of $42)
d) Sold 110 shares of treasury stock at $38 per share:
Dr Cash 4,180
Dr Paid-in capital - common stock 620
Cr Common stock 4,800
( to record the sell of 110 shares repurchased at selling price of $38)
Explanation:
a)
Following repurchased of 400 shares at $40 each, cash account goes down (Cr) by 40 x 400 = $16,000; Treasury account will go up (Dr) by the same amount.
b)
Following repurchased of 290 shares at $45 each, cash account goes down (Cr) by 290 * 45 = $13,050; Treasury account will go up (Dr) by the same amount.
c)
As FIFO apply, the selling of 370 repurchased stock will make the Common stock account goes up (Cr) by 40 x 370 = 14,800; Cash account goes up (Dr) by 370 x 42 = $15,540; the difference of 740 will go into (Cr) Paid-in capital - common stock.
d)
As FIFO apply, the selling of 110 repurchased stock will make the Common stock account goes up (Cr) by 30 x 40 + (110-30) * 45 = $4,800; Cash account goes up (Dr) by 110 x 38 = $4,180; the difference of 620 will go into (Dr) Paid-in capital - common stock.
