The Spivak Company was involved in the following treasury stock transactions during 2011; a. Purchased 80,000 shares

Question:

The Spivak Company was involved in the following treasury stock transactions during 2011;

a. Purchased 80,000 shares of its $1 par value common stock on the market for $2.50 per share.

b. Purchased 16,000 shares of its $1 par value common stock on the market for $2.80 per share.

c. Sold 44,000 share purchased in a for $131,000.

d. Sold the other 36,000 shares purchased in a for $72,000.

e. Sold 6,000 of the remaining shares of treasury stock for $1.60 per share.

f. retired all the remaining shares of treasury stock. All shares originally were issued at $1.50 per share.

Required

1. Record the treasury stock transactions in T accounts.

2. What is the reasoning behind treating the purchase of treasury stock as a reduction in stockholders’ equity as opposed to treating it as an investment asset?

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... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...