Question

Journalizing treasury stock transactions and reporting stockholders’ equity

Southern Amusements Corporation had the following stockholders’ equity on

November 30:

Paid-In Capital:

Common Stock—\(5 Par Value; 1,300 sharesauthorized, 250 shares issued and outstanding1,250

Retained Earnings50,000

Total Stockholders’ Equity \) 55,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 3,750

Total Paid-In Capital

\(5,000

On December 30, Southern purchased 200 shares of treasury stock at \)15 per share.

Requirements

1. Journalize the purchase of the treasury stock.

Short answer

Treasury stock will be debited with $3,000 and Cash will be credited with $3,000.

Step-by-step solution

Computation

$\begin{array}{rcl}\mathbf{TreasuryStock}& \mathbf{=}& \mathbf{NumberofStocks}\mathbf{\times }\mathbf{ValuePerShare}\\ & \mathbf{=}& \mathbf{200}\mathbf{\times }\mathbf{\$}\mathbf{15}\\ & \mathbf{=}& \mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{000}\\ & & \end{array}$

Journal entry of purchase of treasury stock

Date	Transaction	Debit	Credit
Dec 30	Treasury stock	$3,000
	Cash		$3,0000
	To record purchase of treasury stock