Treasury Stock: Par Value and Cost Methods
The stockholders’ equity of Thomas Company as of December 31, 2007, was as follows:
|
Common stock, $1 par, authorized 275,000 shares; |
|
|
240,000 shares issued and outstanding |
$ 240,000 |
|
Paid in capital in excess of par |
3,840,000 |
|
Retained earnings |
900,000 |
On June 1, 2008, Thomas reacquired 15,000 shares of its common stock at $16. The following transactions occurred in 2008 with regard to these shares.
July 1 Sold 5,000 shares at $20.
Aug. 1 Sold 7,000 shares at $14.
Sept. 1 Retired 1,000 shares.
1. Using the cost method to account for treasury stock:
(a) Prepare the journal entries to record all treasury stock transactions in 2008.
(b) Prepare the stockholders’ equity section of the balance sheet at December 31, 2008, assuming Retained Earnings of $1,005,000 (before the effects of treasury stock transactions).
2. Using the par value method to account for treasury stock:
(a) Prepare the journal entries to record all treasury stock transactions in 2008.
(b) Prepare the Stockholders’ Equity section of the balance sheet at December 31, 2008, assuming Retained Earnings of $1,005,000 (before the effects of treasury stock transactions).