Question
Problem 18-3 Reacquired shares-comparison of retired shares and treasury shares [LO18-5] National Supplys shareholders equity included the following accounts at December 31, 2017: Shareholders' Equity
Problem 18-3 Reacquired shares-comparison of retired shares and treasury shares [LO18-5]
National Supplys shareholders equity included the following accounts at December 31, 2017:
Shareholders' Equity | ($ in millions) | |
Common stock, 9 million shares at $1 par | $ | 9,000,000 |
Paid-in capitalexcess of par | 63,000,000 | |
Retained earnings | 92,500,000 | |
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 400,000 shares at $10 per share. |
February 17, 2019 | Reacquired 400,000 shares at $7.50 per share. |
November 9, 2020 | Sold 275,000 shares at $9 per share (assume FIFO cost). |
2. Prepare the shareholders equity section of National Supplys balance sheet at December 31, 2020, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $16 million in 2018, $18 million in 2019, and $20 million in 2020. No dividends were paid during the three-year period.
No | Date | General Journal | Debit | Credit |
---|---|---|---|---|
1 | February 15, 2018 | Common stockselected answer correct | 400,000selected answer correct | |
Paid-in capitalexcess of parselected answer correct | 2,800,000selected answer correct | |||
Retained earnings selected answer correct | 800,000selected answer correct | |||
Cash selected answer correct | 4,000,000selected answer correct | |||
2 | February 17, 2019 | Common stock selected answer correct | 400,000selected answer correct | |
Paid-in capitalexcess of par selected answer correct | 2,800,000selected answer correct | |||
Paid-in capitalshare repurchase selected answer correct | 200,000selected answer correct | |||
Cash selected answer correct | 3,000,000selected answer correct | |||
3 | November 09, 2020 | Cash selected answer correct | 2,475,000selected answer correct | |
Common stock selected answer correct | 275,000selected answer correct | |||
Retained earnings selected answer incorrect | 2,200,000selected answer correct |
No | Date | General Journal | Debit | Credit |
---|---|---|---|---|
1 | February 15, 2018 | Treasury stockselected answer correct | 4,000,000selected answer correct | not attempted |
Cashselected answer correct | not attempted | 4,000,000selected answer correct | ||
2 | February 17, 2019 | Treasury stockselected answer correct | 3,000,000selected answer correct | not attempted |
Cashselected answer correct | not attempted | 3,000,000selected answer correct | ||
3 | November 09, 2020 | Cashselected answer correct | 2,475,000selected answer correct | not attempted |
Investment in Leasco International stocks elected answer incorrect | 275,000selected answer correct | not attempted | ||
Treasury stockselected answer correct | not attempted | 2,750,000selected answer correct |
- Req 2
Prepare the shareholders equity section of National Supplys balance sheet at December 31, 2020, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $16 million in 2018, $18 million in 2019, and $20 million in 2020. No dividends were paid during the three-year period. (Enter your answers in whole dollars.)
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