Question

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.

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