Capital stock outstanding 10000 shares par value 15 Paidin c

Capital stock outstanding, 10,000 shares, par value $15 Paid-in capital in excess of par Retained carnings S150,000 40,000 60,000 Prepare the journal entry for the following transactions under the cost method of accounting for treasury stock Purchased 1,000 shares of common stock to be held as treasury stock, paying $25 per share. 1. 2. Sold 300 of these shares of at $28 per share. 3. Sold the remaining shares at $23 per share

Solution

Note: On sale of 700 treasury stock at $23, the difference of $1400 [700 x ($25 - $23)] is debited to Paid-in capital-Treasury stock to the extent of balance available $900. The remaining amount of $500 ($1400 - $900) is debited to the retained earnings.  

Transaction	Account Titles and Explanation	Debit	Credit
1	Treasury stock (1000 x $25)	25000
	Cash		25000
	(To record purchase of treasury stock)
2	Cash (300 x $28)	8400
	Treasury stock (300 x $25)		7500
	Paid-in capital-Treasury stock (300 x $3)	900
	(To record sale of treasury stock)
3	Cash (700 x $23)	16100
	Paid-in capital-Treasury stock	900
	Retained earnings [(700 x $2) - $900]	500
	Treasury stock (700 x $25)		17500
	(To record sale of treasury stock)