Question

In 2019, Southwestern Corporation reacquired shares of its common stock and later sold shares in two separate transactions. Southwestern had the following account balances at December 31, 2018:

   Stockholders’ Equity                                                                  

   Common stock, 100,000 shares at $1 par, .............. $   100,000
Paid-in capital – excess of par..................................      900,000
Retained earnings....................................................      500,000

Required:

1. On the following page, prepare the entries for both the purchase and subsequent resale of shares, treated as retired stock for the following entries:

   

            February 2: Reacquired 70,000 shares of stock at $12 per share.  

March 14: Sold 20,000 shares at $14 per share.  

May 12: Sold 25,000 shares at $8 per share.  

2. On the following page, prepare the entries for both the purchase and subsequent resale of shares, treated as treasury stock for the following entries:

February 2: Reacquired 70,000 shares of stock at $12 per share.  

March 14: Sold 20,000 shares at $14 per share.  

May 12: Sold 25,000 shares at $8 per share.  

Answer 1