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On January 10, ACE Corporation purchased 5,000 shares of its own common stock for $300,000. On...

On January 10, ACE Corporation purchased 5,000 shares of its own common stock for $300,000. On August 10, a total of 2,000 shares were sold at $65.00 per share. On September 10, a total of 2,000 more shares were sold at $45.00 per share. On December 10, the remaining shares were sold for $40.00 per share. These are the only treasury stock transactions ever made by the corporation.

Prepare the journal entries required on January 10, August 10, September 10, and Dec 10.

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Answer #1

Purchase price of treasury stock = $300,000 / 5,000 = $60

January 10 Treasury stock $300,000
Cash $300,000
August 10 Cash (2,000*$65) $130,000
Treasury stock (2,000*$60) $120,000
Additional paid in capital - treasury stock $10,000
September 10 Cash (2,000*$45) $90,000
Additional paid in capital - treasury stock $10,000
Retained earnings $20,000
Treasury stock (2,000*$60) $120,000
December 10 Cash (1,000*$40) $40,000
Retained earnings $20,000
Treasury stock (1,000*$60) $60,000
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