Sheridan Company purchased from its stockholders 6,000 shares of its own previou

Question

Sheridan Company purchased from its stockholders 6,000 shares of its own previously issued stock for $306,000. It later resold 1,975 shares for $54 per share, then 1,975 more shares for $49 per share, and finally 2,050 shares for $43 per share. Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record purchase from stockholders.) (To record sales of shares at $54 per share.) To record sales of shares at $49 per share.)

Explanation / Answer

Sheridan Company

Journal Entries

Account Titles and Explanation

Debit

Credit

Treasury Stock

$306,000

Cash

$306,000

(To record purchase of6,000 shares from stockholders)

Cash

$106,650

Treasury Stock

$100,725

Paid-in Capital in excess of Treasury Stock

$5,925

(To record sale of 1,975 shares at $54, the excess over purchase price $3 (54 -51) is paid-in capital)

Cash

$96,775

Paid-in Capital in excess of Treasury Stock

$3,950

Treasury Stock

$100,725

(To record sale of 1,975 shares at $49, the difference $2 per share debited to paid-in capital treasury stock)

Cash

$88,150

Paid in capital treasury stock

$1,975

Retained Earnings

$14,425

Treasury stock

$104,550

(to record sale of 2,050 shares at $43 per share, the excess of purchase price debited to paid-in capital and partly debited to retained earnings)

Notes:

Purchase price of treasury stock = $306,000/6,000 = $51

Paid-in capital, treasury stock = $54 - $51 = $3 per share, 3 x 1975 shares = $5,925

Paid in capital treasury stock = $51 - $49 = $2 per share, 2 x 1,975 = $3,950

Paid in capital treasury stock = $51 - $43 = $8 per share

Partly debited to paid-in capital = 8 x 2,050 shares = $16,400

Less: paid in capital treasury stock = $5,925 - $3,950 = $1,975

Remaining paid in capital, treasury stock debited to retained earnings = $14,425

Account Titles and Explanation

Debit

Credit

Treasury Stock

$306,000

Cash

$306,000

(To record purchase of6,000 shares from stockholders)

Cash

$106,650

Treasury Stock

$100,725

Paid-in Capital in excess of Treasury Stock

$5,925

(To record sale of 1,975 shares at $54, the excess over purchase price $3 (54 -51) is paid-in capital)

Cash

$96,775

Paid-in Capital in excess of Treasury Stock

$3,950

Treasury Stock

$100,725

(To record sale of 1,975 shares at $49, the difference $2 per share debited to paid-in capital treasury stock)

Cash

$88,150

Paid in capital treasury stock

$1,975

Retained Earnings

$14,425

Treasury stock

$104,550

(to record sale of 2,050 shares at $43 per share, the excess of purchase price debited to paid-in capital and partly debited to retained earnings)

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