Answer:
Explanation:
We have two journal entries to be able record the repurchase and retirement of the shares
First journal to record the share repurchased
Dr Treasury stock 8,910
Cr Cash 8,910
While the second journal is to record the retirement of share repurchased:
Dr Common stock 1,100
Dr Paid-in capital common stock 2,310
Dr Retained Earning 5,500
Cr Treasury stock 8,910
To record the share repurchased:
The Treasury stock account is debited with the amount that is equals to cash paid for stock that is been repurchased, therefore, offsetting entry is credit Cash account = Number of share repurchased multiply Price purchase
= 1,100 * 8.1
= $8,910
Also, to record the retirement of share repurchased:
The common stock account is been debited at the amount = Par value multiply by Share retired
= 1 * 1,100
= $1,100
As one common stock is carried $2.1 value excess of par ( which is calculated as 168,210 / 80,100); paid-in capital account is debited by $2,310 ( 1,100 * 2.1)
The retained earning is been debited by the amount is calculated as follows,;
Number of share retired multiply by ( Price at retired - Par value - Excess of par value) = 1,100 * ( 8.1 -1-2.1) = $5,500
Treasury account is debited $8,910 to bring the balance of this account to zero as stocks repurchased are fully retired.
