Question
Doll House Corporation's balance sheet reported the following during 2019: Capital stock outstanding, 5,000 shares, par $ 30 per share$ 150,000 Paid-in capital in excess
Doll House Corporation's balance sheet reported the following during 2019:
Capital stock outstanding, 5,000 shares, par $ 30 per share$ 150,000
Paid-in capital in excess of par $ 80,000
Retained earnings $ 100,000
The following transactions occurred this year:
1. Purchased 120 shares of capital stock to be held as treasury stock, paying $ 80 per share.
2. Sold 90 of the shares of treasury stock at $ 75 per share.
3. Sold the remaining shares of treasury stock at $ 85 per share.
Required
1. Prepare the journal entry for these transactions under the cost method of accounting for treasury stock.
2- Explain the reasons for which a corporation might purchase its own stock, mention your reference in Harvard format.
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