Question

On October 10, the stockholders’ equity of Sherman Systems appears as follows. Common stock–$10 par value, 81,000 shares authorized, issued, and outstanding $ 810,000 Paid-in capital in excess of par value, common stock 261,000 Retained earnings 936,000 Total stockholders’ equity $ 2,007,000 1. Prepare journal entries to record the following transactions for Sherman Systems. Purchased 5,900 shares of its own common stock at $34 per share on October 11. Sold 1,225 treasury shares on November 1 for $40 cash per share. Sold all remaining treasury shares on November 25 for $29 cash per share. 2. Prepare the stockholders' equity section after the October 11 treasury stock purchase.

Answer 1

we will record journals first

Date	Accounts	debit	Credit
Oct 11	Treasury stock, common	$200,600[5,900*$34]
	Cash		$200,600
Nov-01	Cash [1225*$40]	$49,000
	Treasury stock [1,225*$34]		$41,650
	Paid in capital, treasury stock		$7,350
Nov 25	Cash[$29*4,675(5,900-1,225)]	$135,575
	Paid in capital,treasury stock	$7,350
	Retained earnings	$16,025[$158,950-$135,575-7,350]
	Treasury stock[$34*4,675]		$158,950

revised shareholder's equiy section after oct 11 purchase

	Amount
Common stock $10	$810,000
Paid in capital in excess of par value	$261,000
Total contributed capital	$1,071,000
Retained earnings	$936,000
Total	$2,007,000
Less: cost of treasury stock	-$200,600
Total shareholder's equity	$1,806,400

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