6. Accounting for Treasury Stock (9 points) On 15 March 2018 Bruin Company reacq

Question

6. Accounting for Treasury Stock (9 points) On 15 March 2018 Bruin Company reacquired 1,200,000 of its common shares in the market at $40 per share. The par value per share is $1. On 3 July 2018, Bruin sold 700,000 treasury shares at an average price of $42 per share. Bruin sold the remaining shares at $25 per share on 27 November 2018. Assume there is no balance in Paid-in Capital from Treasury Stock on 7/3/18. Required - Provide journal entries for these transactions (3/15,713,1/27) using the cost method of accounting for treasury stock.

Explanation / Answer

**Remaining shares = 1,200,000 - 700,000 = 500,000 shares

Date Account title Debit credit 3/15 2018 Treasury stock 48,000,000 cash   [1200000*40] 48,000,000 [Being stock reacquired] 7/3/ 2018 cash   [700000*42] 29,400,000 Additional paid in capital -treasury stock 1,400,000 Treasury stock [700000*40] 28,000,000 [treasury stock resold] 11/27/2018 cash   [500000*25] 12,500,000 Additional paid in capital -treasury stock 1,400,000 Retained earning 6,100,000 Treasury stock   [500000*40] 20,000,000

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