When you did your treasury stock transactions for Tuesdays post, did you notice

ID: 2793472 • Letter: W

Question

When you did your treasury stock transactions for Tuesdays post, did you notice anything?? When you resold Treasury stock.....isn't it interesting that you DID NOT HIT THE INCOME STATEMENT FOR A GAIN OR LOSS?? Why do you think that is? (That's first question).

Second question:
Corporation issued common stock to shareholders of 10,000 shares par $ 3.00, and received cash of $45,000.

Corporation issued cumulative preferred stock of 5,000 shares par $ 7.00 at 5%, and issued it at a market value of $ 10 per share

Corporation issued 2,000 shares of common stock for a patent fair value of $ 100,000. The par of the common stock was $ 3.00

Corporation issued 1,000 shares of common stock for equipment. Par of stock was 3.00. Market value on date of transaction was $ 7.00. The fair value of the equipment was not known.

The corporation repurchased 2,000 shares of its own stock as Treasury stock under the cost method. The price of the stock at the time of the repurchase was $ 5.00 per share.

The corporation sold 700 shares of treasury stock at a cost of 7.00 per share.

The corporation sold 1,300 shares of treasury stock at a cost of 1.50 per share.

Do all of the transactions, and explain them. The treasury stock is done under the cost method. Also, tell me at the end, the balance of the following accounts:

Common stock

Preferred stock

APIC Common

APIC Preferred

APIC Treasury stock

Retained Earnings.

Explanation / Answer

As per policy, we are allowed to answer only one question or four parts of a question, so answering Q 1 :

Question 1) Whenever the treasury stock is resold, whatever above the cost of the treasury stock, it taken as “APIC Treasury stock” ie. The additional capital over the cost of treasury stock. This is because it is not a revenue nature transaction, but it is the capital nature transaction and not included in Income Statement. So, the entry would be:

Debit $

Credit $

Cash

(No. of T Stock sold * Sold market price)

Treasury Stock

(No. of T Stock sold * cost price/ purchase price per share)

Additional Capital over the cost price

(No. of T Stock sold * Sold market price) - (No. of T Stock sold * cost price/ purchase price per share)