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.)

Shareholders Equity	Retirement	Treasury stock
Paid-in capital:
Paid-in capitalexcess of parselected answer correct		$63,000,000selected answer correct
Common stockselected answer correct		9,000,000selected answer correct
Retained earningsselected answer correct
Paid-in capitalshare repurchaseselected answer correct		0selected answer correct
Less: Treasury stockselected answer correct		4,250,000selected answer correct
Total shareholders equity	$0	$67,750,000