The Ray Holt Corporation has retained you as a consultant on accounting policies and procedures. During 2007
Question:
1. Reacquired 100 shares of its $10 par common stock at $20 per share. The shares had originally been issued at $23 per share.
2. Reacquired 150 shares of its $10 par common stock at $24 per share. The shares had originally been issued at $23 per share.
3. Reacquired 50 shares of its $100 par preferred stock at $140 per share. The shares had originally been issued at $170 per share.
4. Sold all common treasury shares held at $25 per share.
5. Reacquired 150 shares of its $100 par preferred stock at $130 per share. The shares had originally been issued at $170 per share.
6. Retired all preferred shares held in the treasury.
Required
1. Is the corporation correct in assuming that its treasury stock is an asset and that it can recognize a profit or gain from its treasury stock transactions? Explain.
2. Prepare an analysis of treasury stock accounting for Mr. Robert Richter, the controller. This analysis should contain proper journal entries for each of the treasury stock transactions occurring during 2007, prepared using the cost method discussed in the chapter.
3. Conclude the analysis by discussing how “gains” on treasury stock are reported and how treasury stock is reported on a corporation’s balance sheet.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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