Question

Treasury stock transactions

On Jan 1, 2019, Metco Inc, reported 411,050 shares of $5 par value common stock as being issued and outstanding. On Mar 24, 2019, Metco Inc, purchased for its treasury 3,600 shares of its common stock at a price of $37 per share. On Aug 19, 2019, 1, 450 of these treasury shares were sold for $43 per share. Metco's directors declared cash dividends of $1.50 per share during the second quarter and again during the fourth quarter, payable on June 30, 2019, and Dec 31, 2019, respectively. A 4% stock dividend was issued at the end of the year. There were no other transactions affecting common stock during the year.

Required:

a. Use the horizontal model (or write the entry) to show the effect of the treasury stock purchase on Mar 24, 2019.

b. Calculate the total amount of the cash dividends paid in the second quarter.

c. Use the horizontal model (or write the entry) to show the effect of the sale of the treasury stock on Aug 19, 2019.

d. Calculate the total amount of cash dividends paid in the fourth quarter. e. Calculate the number of shares of stock issued in the stock dividend.

Answer 1

a.

Date	Account Titles	Debit	Credit
Mar-24	Treasury Stock	$     133,200
2019	Cash		$       133,200

b.
Total Amount of Dividend for second quarter = (411050-3600) x $1.50 = $611,175

c.

Date	Account Titles	Debit	Credit
Aug-19	Cash	$       62,350
2019	Treasury Stock		$          52,200
	Paid in Capital from Treasury Stock		$          10,150

d.
Total Amount of Dividend for second quarter = (411050-3600+1450) x $1.50 = $613,350

e.
Shares issued in stock dividend = (411050-3600+1450) x 4% = 16356 shares