At January 1, 1997, the records of Frazer Corporation provided the following:
Capital stock, par $10, 60,000 shares outstanding $ 600,000Contributed capital in excess of par 240,000Retained earnings 160,000
During the year, the following transactions affecting shareholders' equity were recorded:
a. Purchased 1,000 shares of treasury stock at $20 per share.
b. Purchased 1,000 shares of treasury stock at $22 per share.
c. Sold 1,200 shares of treasury stock at $25 per share.
d. Net income for 1997 was $45,000.
State law places a restriction on retained earnings equal to the cost of treasury stock held.
Required:
1. Give entries for each of the above transactions, in parallel columns, assuming application of (a) the cost method and (b) the par value method. Assume FIFO flow for treasury stock.
2. Give the resulting balances in each capital account. Include any required disclosure note related to the treasury stock.