Question

Prepare journal entries to record the following transactions for Sherman Systems. a. Purchased 5,900 shares of its own common stock at $34 per share on October 11. b. Sold 1,225 treasury shares on November 1 for $40 cash per share. c. Sold all remaining treasury shares on November 25 for $29 cash per share.

Answer 1

Answer: See explanation

Explanation:

The journal entry to record the transaction for Sherman systems will be:

Oct-11

Debit Treasury Stock (5,900 × $34) =

$200,600

Credit Cash = $200,600

(To record repurchase of 5900 own shares)

Nov-01

Debit Cash (1,225 × $40) = $49,000

Credit Treasury stock (1,225 × $34) = $41,650

Credit Paid in capital-Treasury Stock = $7,350

(To record sale 1225 shares from treasury stock)

Nov-25

Debit Cash (5,900-1,225) × $29) = $135,575

Debit Paid in capital-Treasury Stock = $7,350

Debit Retained earnings = $16,025

Credit Treasury stock (5,900-1,225) × $34) = $158,950

(To record sale balance from treasury stock)