Treasury Stock, Cost Method Bush Caine Company reported the following data on its December 31, 2006 balance sheet:
|
Preferred stock, $50 par |
$50,000 |
|
Additional paid in capital on preferred stock |
4,000 |
|
Common stock, $10 par |
$100,000 |
|
Additional paid in capital on common stock |
80,000 |
|
Retained earnings |
95,000 |
The following transactions were reported by the company during 2007:
1. Reacquired 200 shares of its preferred stock at $57 per share.
2. Reacquired 500 shares of its common stock at $16 per share.
3. Sold 100 shares of preferred treasury stock at $58 per share.
4. Sold 200 shares of common treasury stock at $17 per share.
5. Sold 100 shares of common treasury stock at $9 per share.
6. Retired the shares of common stock remaining in the treasury.
The company maintains separate treasury stock accounts and related additional paid in capital accounts for each class of stock.
Required
1. Prepare the journal entries required to record the treasury stock transactions using the cost method.
2. Assuming the company earned a net income in 2007 of $30,000 and declared and paid dividends of $10,000, prepare the stockholders’ equity section of its balance sheet at December 31, 2007.