Treasury Stock Transactions The Stockholders’ Equity category of Little Joe’s balance sheet on January 1, 2010, appeared as follows:

Common stock, $5 par, 40,000 shares issued and outstanding $200,000 Additional paid-in capital 90,000 Retained earnings 100,000 Total stockholders’ equity $390,000 The following transactions occurred during 2010:

a. Reacquired 5,000 shares of common stock at $20 per share on February 1.

b. Reacquired 1,200 shares of common stock at $13 per share on March 1.

Required 1. Identify and analyze the effect of each transaction.

2. Assume that the treasury stock was reissued on October 1 at $12 per share. Did the company benefi t from the treasury stock reissuance? Where is the “gain” or

“loss” presented on the fi nancial statements?

3. What effect did the two transactions to purchase treasury stock and the later reissuance of that stock have on the Stockholders’ Equity section of the balance sheet?

AppendixLO1