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Homework answers / question archive /  Reacquired shares—comparison of retired shares and treasury shares  L018-5 0  National Supply's shareholders' equity included the following accounts at December 31 2020: Shareholders' Equity Common stock

 Reacquired shares—comparison of retired shares and treasury shares  L018-5 0  National Supply's shareholders' equity included the following accounts at December 31 2020: Shareholders' Equity Common stock

Accounting

 Reacquired shares—comparison of retired shares and treasury shares 
L018-5 0 
National Supply's shareholders' equity included the following accounts at December 31 2020: Shareholders' Equity Common stock. 6 million shares at $1 par $ 6.000.000 
Paid•in capital—excess of par Retained earnings 
30.000.000 
86.500.000 
Page 1092 
Required: I. National Supply reacquired shares of its common stock in two separate transactions and later sold shares. Prepare the entries for each of the transactions under each of two separate assumptions: the shares are (a) retired and (b) accounted for as treasury stock. February 15, 2021 Reacquired 300.000 shares at $8 per share. February 17, 2022 Reacquired 300.000 shares at $5.50 per share. November 9. 2023 Sold 200.000 shares at $7 per share (assume FIFO cost). 2. Prepare the shareholders' equity section of National Supply's balance sheet at December 31.2023• assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $14 million in 2021. $15 million in 2022. and $16 million in 2023. No dividends were paid during the three-year period. 
 

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1-a)      
Date Account Titles and Explanation Debit Credit
15-Feb-21 Common Stock (300,000 shares *$1) $300,000   
  Paid in Capital in Excess Par ( 300,000 shares *$ 5) $1,500,000    
  Retained Earning ($2,400,000 - $300,000 -$1,500,000) $600,000   
              Cash (300,000 shares*$8 )   $2,400,000  
  ( To record retirement of 300,000 shares at $ 8)    
17-Feb-22 Common Stock (300,000 shares *$1) $300,000   
  Paid in Capital in Excess Par ( 300,000 shares *$ 5) $1,500,000    
              Cash (300,000 shares*$ 5.50 )   $1,650,000  
              Paid in Capital from Share Purchases      $150,000 
  ( $300,000 +$ 1,500,000 -$1,650,000)    
  ( To record retirement of 300,000 shares at $ 5.50 )    
   
9-Nov-23 Cash ( 200,000 shares *$ 7) $1,400,000    
            Common Stock ( 200,000 shares *$ 1)   $200,000 
            Paid in Capital in Excess Par ( 200,000 shares *$ 6)   $1,200,000  
  ( To record sale of stock 200,000 shares )    
       
1-b)      
       
Date Account Titles and Explanation Debit Credit
15-Feb-21 Treasury Stock ( 300,000 shares *$ 8) $2,400,000    
                     Cash   $2,400,000  
  ( To record acquisition of 300,000 shares at $ 8)    
17-Feb-22 Treasury Stock ( 300,000 shares *$ 5.50) $1,650,000    
                     Cash   $1,650,000  
  ( To record acquisition of 300,000 shares at $ 5.50 )    
9-Nov-23 Cash ( 200,000 shares *$ 7 ) $1,400,000    
  Retained Earnings ($1,600,000 -$ 1,400,000 ) $2,000,000    
            Treasury Stock ( 200,000 shares *$ 8 )   $1,600,000  
  ( To record 200,000 shares sold at $ 7 )    

2) Shareholders' Equity Section:

Shareholder's Equity Retirement Treasury stock
Paid in capital :    
common stock , $ 1 par $5,600,000   $6,000,000  
paid in capital - excess of par $28,200,000   $30,000,000  
paid in capital - share repurchase $150,000  $0 
retained earnings $130,900,000   $131,300,000  
less: treasury stock -400,000 shares (at cost )   ($2,450,000)
Total shareholder's equity $164,850,000   $164,850,000  

 

 

Workings:    
       
1(A)      
                                                         COMMON STOCK  
    Beg. Bal $6,000,000  
15-Feb-18 $300,000  Nov 9,2020 $200,000 
17-Feb-19 $300,000     
End. Bal ( bal in fig) $5,600,000      
  $6,200,000     $6,200,000  
                                      Paid in capital in Excess of Par  
    Beg. Bal $30,000,000  
15-Feb-18 $1,500,000   Nov 9,2020 $1,200,000  
17-Feb-19 $1,500,000      
End. Bal ( bal in fig) $28,200,000      
  $31,200,000     $31,200,000  
                                   Paid in capital from share purchases  
    17-Feb-18 $150,000 
End. Bal ( bal in fig) $150,000     
       
                                           Retained earnings  
    Beg. Bal $86,500,000  
15-Feb-18 $600,000  Dec 31,2018 $14,000,000  
    Dec 31,2019 $15,000,000  
    Dec 31,2020 $16,000,000  
End. Bal ( bal in fig) $130,900,000      
  $131,500,000     $131,500,000  
1(B)      
                                                         COMMON STOCK  
    Beg. Bal $6,000,000  
End. Bal ( bal in fig) $6,000,000      
       
                                      Paid in capital in Excess of Par  
    Beg. Bal $30,000,000  
End. Bal ( bal in fig) $30,000,000      
       
                                               Treasury stock  
       
15-Feb-18 $2,400,000   Nov 9,2020 $1,600,000  
17-Feb-19 $1,650,000   End. Bal ( bal in fig) $2,450,000  
  $4,050,000     $4,050,000  
                                                Retained earnings  
    Beg. Bal $86,500,000  
Nov 9,2020 $200,000  Dec 31,2018 $14,000,000  
    Dec 31,2019 $15,000,000  
End. Bal ( bal in fig) $131,300,000   Dec 31,2020 $16,000,000  
  $131,500,000     $131,500,000  

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