12. On December 31,2015, Rebel Corporation\'s balance sheet reported the followi

Question

12. On December 31,2015, Rebel Corporation's balance sheet reported the following Common stock, $1 par Paid-in capital excess of par Retained eamings Treasury stock (14,000 shares at cost) $1,000,000 3,400,000 5,220,000 (420,000) During 2016, Rebel decided to discontinue accounting for share buybacks as treasury shares. Instead, the shares will be treated as having been retired. Required: Prepare the appropriate journal entry to reclassify treasury shares as retired shares. (Do not round your share amounts. If no entry is required for a transaction/event, select "No journal entry required" the first account field.) View transaction list Journal entry worksheet Record the entry to reclassify treasury shares as retired shares Note: Enter debits before credits. General Journal Debit Credit

Explanation / Answer

Solution: Transaction General Journal Debit Credit 1. Common stock 14,000 Paid-in capital-excess of par 47,600 Retained earnings 358,400 Treasury stock 420,000 Working Notes: Transaction General Journal Debit Credit 1. Common stock 14,000 [No. of shares x par value ] [14,000 x $1 ] Paid-in capital-excess of par 47,600 [No. of shares x (Paid-in capital-excess of par / common stock)] [14,000 x (3,400,000/1,000,000)] [14,000 x 3.4 = 47,600 ] Retained earnings 358,400 (balance figure) [420,000 - 14,000 - 47,6000 = 358,400] Treasury stock 420,000 [cost value given] Notes: Above journal entry is done to retire the share which were earlier purchased and remain as treasury stock till above entry or reissued] Please feel free to ask if anything about above solution in comment section of the question.

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