4. Th e December 31, 2018, balance sheet of Springer Company included the follow
ID: 2595560 • Letter: 4
Question
4. Th e December 31, 2018, balance sheet of Springer Company included the following: Common stock, 20 million shares outstanding at $1 par s 20, 000,000 Paid-in capital-excess of par Retained earnings 100,000, 000 115,000, 000 Springer completed the following transactions in 2018 relating to treasury stock: March 17: Reacquired 5 million shares at $10. May 17: Reacquired 3 million shares at $9. August 10: Sold 6 million treasury shares at $12 Required: Prepare journal entries to record the foregoing transactions on a FIFO basisExplanation / Answer
(In Millions)
Dr. $
Cr. $
March 17
Treasury Stock (5 million * $10)
50
Cash
50
(Being 5 million shares purchased @$10)
May 1
Treasury Stock (3 million * $9)
27
Cash
27
(Being 3 million shares purchased @$9)
August 10
Cash (6 million * $12)
72
Treasury Stock
59
Additional paid in capital
13
(Being 6 million treasury stock reissued @ $12)
Value of Treasury stock Sold
It is mentioned that we will have to follow FIFO, so out of 6 million sold, 5 million of March 17 will be sold and then 1 million of May 17
= (5 million * 10) + (1 million * $9)
Value of Treasury stock Sold = $59 million
Additional paid in capital = 72 million – 59 million
Additional paid in capital = 13 million
Dr. $
Cr. $
March 17
Treasury Stock (5 million * $10)
50
Cash
50
(Being 5 million shares purchased @$10)
May 1
Treasury Stock (3 million * $9)
27
Cash
27
(Being 3 million shares purchased @$9)
August 10
Cash (6 million * $12)
72
Treasury Stock
59
Additional paid in capital
13
(Being 6 million treasury stock reissued @ $12)
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