Question

Montgomery Co. previously issued 100,000 shares of its $1 par common stock for $10. In 2018,...

Montgomery Co. previously issued 100,000 shares of its $1 par common stock for $10.

In 2018, Montgomery Co. completed the following treasury stock transactions:

2/2/18 Reacquired 70,000 shares at $12

3/17/18 Sold 20,000 shares at $14

5/17/18 Sold 25,000 shares at $8

Required:

Prepare the journal entries to record the above transactions, using the cost method.

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Answer #1

Journal entries

Date account and explanation debit credit
2/2/18 Treasury stock (70000*12) 840000
cash 840000
(To record treasury stock purchased)
3/17/18 Cash (20000*14) 280000
Treasury stock (20000*12) 240000
Paid in capital from sale of treasury stock 40000
(To record sale of treasury stock)
5/17/18 Cash (25000*8) 200000
Paid in capital from sale of treasury stock 40000
Retained earnings 60000
Treasury Stock (25000*12) 300000
(To record sale of treasury stock)
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