This activity requires teamwork to reinforce understanding of accounting for treasury stock.
1.Write a brief team statement (a) generalizing what happens to a corporation’s financial position when it engages in a stock “buyback” and (b) identifying reasons why a corporation would engage in this activity.
2. Assume that an entity acquires 100 shares of its $100 par value common stock at a cost of $134 cash per share. Discuss the entry to record this acquisition. Next, assign each team member to prepare one of the following entries (assume each entry applies to all shares): a. Reissue treasury shares at cost. b. Reissue treasury shares at $150 per share.
c. Reissue treasury shares at $120 per share; assume the paid in capital account from treasury shares has a $1,500 balance. d. Reissue treasury shares at $120 per share; assume the paid in capital account from treasury shares has a $1,000 balance. e. Reissue treasury shares at $120 per share; assume the paid in capital account from treasury shares has a zero balance.
3. In sequence, each member is to present his/her entry to the team and explain the similarities and differences between that entry and the previous entry.