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Corp. purchased from its stockholders 5,700 shares of its own previously issued stock for $290,700. It later resold 1,825 shares for $54 per share, then 1,825 more shares for $49 per share, and finally 2,050 shares for $43 per share.
Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock.

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Answer:

The Journal entries are as follows:

(i) Treasury Stock A/c        Dr. $290,700

To cash                                                      $290,700

(To record purchase from stockholders)

(ii) Cash A/c                   Dr. $98,550

To Treasury Stock A/c                              $93,075

To Paid in Capital from Treasury Stock   $5,475

(To record sales of shares at $54 per share)  

Workings:

 Treasury Stock = ($290,700 ÷ 5,700) × 1825

                           = $93,075

(iii) Cash A/c                                              Dr. $89,425

Paid in Capital from Treasury Stock A/c Dr. $3,650

To Treasury Stock A/c                                                 $93,075

(To record sales of shares at $49 per share)  

Workings:

 Treasury Stock = ($290,700 ÷ 5,700) × 1825

                           = $93,075

(iv) Cash A/c                                              Dr. $88,150

Paid in Capital from Treasury Stock A/c Dr. $1,825

Retained earnings A/c                              Dr. $14,575

To Treasury Stock A/c                                                  $104,550

(To record sales of shares at $43 per share)  

Workings:

 Treasury Stock = ($290,700 ÷ 5,700) × 2,050

                           = $104,550

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