Question

On its December 31, 20x6, balance sheet, Block Corporation reported its stockholders’ equity as follows: Common...

On its December 31, 20x6, balance sheet, Block Corporation reported its stockholders’ equity as follows: Common stock—$5 par value, 1,000,000 shares authorized, 100,000 shares issued and outstanding $500,000 Paid-in capital in excess of par value, common 100,000 Retained earnings 400,000 Total stockholders’ equity $1,000,000 During 20x7, the following transactions occurred:

1. Reacquired 2,500 shares at $7 per share.

2. Sold 1,200 shares of treasury stock at $8 per share.

3. Sold 500 shares of treasury stock at $6 per share.

Net income for 20x7 amounted to $100,000.

Required:

a. Prepare entries in journal form for the three transactions involving treasury stock.

b. Compute the amount of total stockholders’ equity to be reported on the December 31, 20x7, balance sheet.

Business   Accounting   
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Answer #1

Journal entries

No account and explanation debit credit
1 Treasury stock (2500*7) 17500
cash 17500
(To record treasury stock purchased)
2 Cash (1200*8) 9600
Treasury stock (1200*7) 8400
Paid in capital from sale of treasury stock 1200
(To record treasury stock sold)
3 cash (500*6) 3000
Paid in capital from sale of treasury stock 500
treasury Stock (500*7) 3500
(To record sale of treasury stock)

Stockholder; equity

Paid in capital
Common Stock 500000
Paid-in capital in excess of par value, common 100000
paid in capital from sale of treasury stock 700
Total paid in capital 600700
Retained earnings 500000
Total 1100700
Less; Treasury stock (800 shares) -5600
Total stockholder's equity 1095100
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