E13-7 On January 1, 2017, the stockholders\' equity section of Newlin Corporatio

Question

E13-7 On January 1, 2017, the stockholders' equity section of Newlin Corporation shows common stock ($5 par value) $1,500,000; paid-in capital in excess of par $1,000,000; and retained earnings $1,200,000. During the year, the following treasury stock transactions occurred. Mar. 1 Purchased 50,000 shares for cash at $15 per share. July 1 S . Sept. 1 Sold 8,000 treasury shares for cash at $14 per share. Instructions (a) Journalize the treasury stock transactions. old 10,000 treasury shares for cash at $17per share (b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share.

Explanation / Answer

Part B

Explanation: cash= (8000*12)= 96000

Treasury stock= (8000*15)=120000

Loss on transaction= 24000

Balance in Pain in capital Treasury stock is only $20000 which was earned on sale of 10000 treasury stock at $17 per share

therefore balance loss on sale of treasury stock i.e. $24000-$2000= $4000 is debited to retained earnings,

Date Account Titles and Explanation Debit Credit Sept 1 cash 96000 paid in capital from Treasury Stock 20000 Retained Earning 4000 Treasury Stock 120000

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