APPLY THE CONCEPTS: Sale of treasury stock above cost On October 20, your compan
ID: 2415311 • Letter: A
Question
APPLY THE CONCEPTS: Sale of treasury stock above cost On October 20, your company has decided to sell off 1,200 shares of the treasury stock that it had previously purchased for $41 per share. The current market value of the stock and the price at which the company will resell these shares is $49 per share. Increase cash: $(49 x[1,200 shares= $58,800 Increase Cash: $149 MIx1 1,200 Ml shares = $ 58,800 Decrease Treasury Stock: $ 41-1 x 1 1,200-1 shares = $ 49,200 | Increase Paid-In Capital, Treasury.stock: $s8,80049,2009,600 -$ 49,200 -$ Increase Paid-InCapital.TreasuryStock: $58,800 9,600Explanation / Answer
On October 20, Company has 1,200 shares of treasury stock for $41 each i.e. $49200 (1,200X$41)
Resell price for each is $49 for 1,200 share of treasury stock i.e. $58800 (1,200X$49)
Difference is Paid in capital Treasury stock i.e. $9600 ($58800-$49200)
Journal entry
Cash A/c Dr. 58,800
To Treasury stock 49,200
To paid up capital, Treasury stock 9,600
In the other Problem on November 10, company once again decided to resell securities of $33 each for 1,800 share i.e. $59,400 ($33X1,800) So cash will increase with this amount.
And the paid up capital treasury stock is $41 each for 1,300 i.e. $73,800 ($41X1,300)
Difference is Decrease in Paid in Capital, Treasury stock i.e. $14,400 ($73,800-$59400)
Journal entry
Cash A/c Dr. 59,400
Paid up capital, Treasury stock Dr. 14,400
To Treasury stock 73,800