Question

(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders’ equity as of January 1, 2017

Common stock, \(5 par value, 20,000 shares issued \)100,000

Paid-in capital in excess of par—common stock 300,000

Retained earnings 320,000

Total stockholders’ equity \(720,000

During 2017, the following transactions occurred.

Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19

per share.

Mar.1 800 shares of treasury stock repurchased above were reissued at \(17

per share.

Mar.18 500 shares of treasury stock repurchased above were reissued at \)14

per share.

Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20

per share.

Instructions

1. Prepare the journal entries to record the treasury stock transactions in 2017, assuming Clemson uses the cost method.
2. Prepare the stockholders’ equity section as of April 30, 2017. Net income for the first 4 months of 2017 was \)130,000.

Short answer

The total debit and credit balance of Journal is $74,700and total shareholders’ equity is $844,600

Step-by-step solution

Meaning of Reissue of Shares

Shares re-issue refers to the process of re-issuing treasury stock in the open market for the purpose of raising more money for business operations.

Preparing Journal Entries

Date	Particular	Debit $	Credit $
February 1	Treasury Stock	38,000
	Cash		38,000
	To record the issue of shares
March 1	Cash	13,600
	Retained Earnings	1,600
	Treasury Stock		15,200
	To record issue of share
March 18	Cash	7,000
	Retained Earnings	2,500
	Treasury Stock		9,500
	To record issue of share
April 22	Cash	12,000
	Treasury Stock		11,400
	Paid-in Capital from Treasury Stock		600
	To record issue of share

Preparing Stockholders’ Equity Section

CLEMSON COMPANY Stockholders’ Equity April 30, 2014
Common stock ,$5par value,20,000 shares Issued,19,900 shares outstanding	$100,000
Paid-in Capital in Excess of par-common stock	300,000
Paid-in capital from treasury stock	600
Total paid-in capital	$400,600
Retained Earnings	445900
Less: Treasury Stocks	1,900
Total Stockholders’ Equity	$844,600

Working note:-

Computation of Retained Earnings

Retained Earnings (beginning balance)	$320,000
March 1 reissuance	(1,600)
March 18 reissuance	(2500)
Net Income for period	130,000
Retained Earnings (ending balance)	$445,900

Computation of Treasury Stock

Treasury Stock (beginning balance)	0
February 1 purchase (2,000)	38,000
March 1 sale (800 shares)	(15,200)
March 18 sale (500 shares)	(9,500)
April 12 sale (600 shares)	(11,400)
Treasury stock (ending balance)	$ 1,900