2 Return to qu Problem 18-2 Share buyback-comparison of retirement and trea sury

Question

2 Return to qu Problem 18-2 Share buyback-comparison of retirement and trea sury stock treatment [LO18-5 The shareholders' equity section of the balance sheet of TNL Systems Inc. included the following accounts at December 31, 2017 10 points Shareholders' Equity millions) Common stock, 330 million shares at si par Paid-in capital-excess of par Paid-in capital-share repurchase Retained earnings S 330 2,310 2,300 Required: 1. During 2018, TNL Systems reacquired shares of its common stock and later sold shares in two separate transactions. Prepare the entries for both the purchase and subsequent resale of the shares assuming the shares are (a) retired and (b) viewed as treasury stock a. On February 5, 2018, TNL Systems purchased 8 million shares at $10 per share. b. On July 9, 2018, the corporation sold 2 million shares at $12 per share. c. On November 14, 2020, the corporation sold 2 million shares at $7 per share K Prev 2 of 8 Next> aw

Explanation / Answer

Requirement 1(A) Date Account Titles and transaction Debit ($ in million) Credit ($ in million) 05-Feb-18 Common Stock (8 Million*$1) $8.00 Paid in Capital - Excess of Par (8* $2310/330) $56.00 Paid in Capital - Share Repurchase $1.00 Retained Earning $15.00 Cash $80.00 (repurchase of 8 million shares @$10 persghare) 09-Jul-18 Cash (2 Million*$12) $24.00 Common Stock (2 Million*$1) $2.00 Paid in Capital - Excess of Par (2 Million*$9) $18.00 Retained Earnings $4.00 (sale of 2 million shares repurchased @ $12 per share) 14-Nov-20 Cash (2 Million*$7) $14.00 Common Stock (2 Million*$1) $2.00 Paid in Capital - Excess of Par (2 Million*$6) $12.00 (sale of 2 million shares repurchased @ $7 per share) Requirement 1(B) Date Account Titles and transaction Debit ($ in million) Credit ($ in million) 05-Feb-18 Treasury Stock (at cost) $80.00 Cash $80.00 (repurchase of 8 million shares @$10 persghare) 09-Jul-18 Cash $24.00 Treasury Stck (at cost) $20.00 paid -in-capital -Share repurchase $4.00 (sale of 2 million shares repurchased @ $12 per share) 14-Nov-20 Cash $14.00 paid in capital -Share Repurchase $5.00 Retained Earnings $1.00 Treasury Stock $20.00 (sale of 2 million shares repurchased @ $7 per share) Shareholders' Equity Retirement Reasury Stock Common stock, 330 million shares at $1 par $326 $330 Paid-in capital—excess of par $2,336 $2,310 Total Paid in Capital $2,662 $2,640 Retained earnings $2,311 $2,299 Total Equity before adjustment of treasury stock $4,973 $4,939 Less: terasury stock (at cost) $0 -$40 Total Shareholders' Equity $4,973 $4,979

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