National Supply's shareholders' equity included the following accounts at December 31, 2017:
Shareholders' Equity ...................................................($ in millions)
Common stock, 6 million shares at $1 par ...............................$ 6,000,000
Paid-in capital-excess of par .............................................30,000,000
Retained earnings ............................................................86,500,000
Required:
1. 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, 2018 .............................Reacquired 300,000 shares at $8 per share.
February 17, 2019......................... Reacquired 300,000 shares at $5.50 per share.
November 9, 2020................ 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, 2020, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $14 million in 2018, $15 million in 2019, and $16 million in 2020. No dividends were paid during the three-year period.