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Chapter 13 Corporations: Organization, Stock Transactions, and Dividen To illustrate, assume that a corporation has the following paid-in capital on January 1: Common stock, $25 par (20,000 shares authorized and issued) $500,000 Excess of issue price over par 150,000 $650,000 On February 13, the corporation purchases 1,000 shares of its common stock at VE per share. The entry to record the purchase of the treasury stock is as follows: 13 Treasury Stock Feb. 45,000 Cash 45,000 Purchased 1,000 shares of treasury stock at $45. On April 29, the corporation sells 600 shares of the treasury stock for $60. The entry to record the sale is as follows: Apr. 29 Cash 36,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock Sold 600 shares of treasury stock at $60. 27,000 9,000 A sale of treasury stock may result in a decrease in paid-in capital. To the extent that Paid-In Capital from Sale of Treasury Stock has a credit balance, it is debited for any such decrease. Any remaining decrease is then debited to the retained earnings account. To illustrate, assume that on October 4, the corporation sells the remaining 400 shares of treasury stock for $40 per share. The entry to record the sale is as follows: 16,000 Oct. 4 Cash 2,000 Paid-In Capital from Sale of Treasury Stock Treasury Stock Sold 400 shares of treasury stock at $40. 18,000 preceding October 4 entry decreases paid-in capital by $2,000. Because Paid-In Capital from Sale of Treasury Stock has a credit balance of $9,000, the entire $2,000 as debited to Paid-In Capital from Sale of Treasury Stock. No dividends (cash or stock) are paid on the shares of treasury stock. To do so would result in the corporation earning dividend revenue from itself. Example Exercise 13-5 Entries for Treasury Stock

Chapter 13 Corporations: Organization, Stock Transactions, and Dividen To illustrate, assume that a corporation has the following paid-in capital on January 1: Common stock, $25 par (20,000 shares authorized and issued) $500,000 Excess of issue price over par 150,000 $650,000 On February 13, the corporation purchases 1,000 shares of its common stock at VE per share. The entry to record the purchase of the treasury stock is as follows: 13 Treasury Stock Feb. 45,000 Cash 45,000 Purchased 1,000 shares of treasury stock at $45. On April 29, the corporation sells 600 shares of the treasury stock for $60. The entry to record the sale is as follows: Apr. 29 Cash 36,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock Sold 600 shares of treasury stock at $60. 27,000 9,000 A sale of treasury stock may result in a decrease in paid-in capital. To the extent that Paid-In Capital from Sale of Treasury Stock has a credit balance, it is debited for any such decrease. Any remaining decrease is then debited to the retained earnings account. To illustrate, assume that on October 4, the corporation sells the remaining 400 shares of treasury stock for $40 per share. The entry to record the sale is as follows: 16,000 Oct. 4 Cash 2,000 Paid-In Capital from Sale of Treasury Stock Treasury Stock Sold 400 shares of treasury stock at $40. 18,000 preceding October 4 entry decreases paid-in capital by $2,000. Because Paid-In Capital from Sale of Treasury Stock has a credit balance of $9,000, the entire $2,000 as debited to Paid-In Capital from Sale of Treasury Stock. No dividends (cash or stock) are paid on the shares of treasury stock. To do so would result in the corporation earning dividend revenue from itself. Example Exercise 13-5 Entries for Treasury Stock

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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This is an example in my textbook for Treasury Stock transactions. Can you explain the step by step calculations for the figures they entered, specifically the $2,000 in the 3rd entry on Oct 4th. Thank you!

Chapter 13 Corporations: Organization, Stock Transactions, and Dividen To illustrate, assume that a corporation has the following paid-in capital on January 1: Common stock, $25 par (20,000 shares authorized and issued) $500,000 Excess of issue price over par 150,000 $650,000 On February 13, the corporation purchases 1,000 shares of its common stock at VE per share. The entry to record the purchase of the treasury stock is as follows: 13 Treasury Stock Feb. 45,000 Cash 45,000 Purchased 1,000 shares of treasury stock at $45. On April 29, the corporation sells 600 shares of the treasury stock for $60. The entry to record the sale is as follows: Apr. 29 Cash 36,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock Sold 600 shares of treasury stock at $60. 27,000 9,000 A sale of treasury stock may result in a decrease in paid-in capital. To the extent that Paid-In Capital from Sale of Treasury Stock has a credit balance, it is debited for any such decrease. Any remaining decrease is then debited to the retained earnings account. To illustrate, assume that on October 4, the corporation sells the remaining 400 shares of treasury stock for $40 per share. The entry to record the sale is as follows: 16,000 Oct. 4 Cash 2,000 Paid-In Capital from Sale of Treasury Stock Treasury Stock Sold 400 shares of treasury stock at $40. 18,000 preceding October 4 entry decreases paid-in capital by $2,000. Because Paid-In Capital from Sale of Treasury Stock has a credit balance of $9,000, the entire $2,000 as debited to Paid-In Capital from Sale of Treasury Stock. No dividends (cash or stock) are paid on the shares of treasury stock. To do so would result in the corporation earning dividend revenue from itself. Example Exercise 13-5 Entries for Treasury Stock
Transcribed Image Text:Chapter 13 Corporations: Organization, Stock Transactions, and Dividen To illustrate, assume that a corporation has the following paid-in capital on January 1: Common stock, $25 par (20,000 shares authorized and issued) $500,000 Excess of issue price over par 150,000 $650,000 On February 13, the corporation purchases 1,000 shares of its common stock at VE per share. The entry to record the purchase of the treasury stock is as follows: 13 Treasury Stock Feb. 45,000 Cash 45,000 Purchased 1,000 shares of treasury stock at $45. On April 29, the corporation sells 600 shares of the treasury stock for $60. The entry to record the sale is as follows: Apr. 29 Cash 36,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock Sold 600 shares of treasury stock at $60. 27,000 9,000 A sale of treasury stock may result in a decrease in paid-in capital. To the extent that Paid-In Capital from Sale of Treasury Stock has a credit balance, it is debited for any such decrease. Any remaining decrease is then debited to the retained earnings account. To illustrate, assume that on October 4, the corporation sells the remaining 400 shares of treasury stock for $40 per share. The entry to record the sale is as follows: 16,000 Oct. 4 Cash 2,000 Paid-In Capital from Sale of Treasury Stock Treasury Stock Sold 400 shares of treasury stock at $40. 18,000 preceding October 4 entry decreases paid-in capital by $2,000. Because Paid-In Capital from Sale of Treasury Stock has a credit balance of $9,000, the entire $2,000 as debited to Paid-In Capital from Sale of Treasury Stock. No dividends (cash or stock) are paid on the shares of treasury stock. To do so would result in the corporation earning dividend revenue from itself. Example Exercise 13-5 Entries for Treasury Stock
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