Treasury stock occurs when shares of common stock are bought back by the issuing company Purchasing back one 's own common stock with cash reduces the amount of the stock on the open market available for public purchase This transaction decreases total on the Although buying back its own shares can...

Treasury stock occurs when shares of common stock are bought back by the issuing company. Purchasing back

Question:

Treasury stock occurs when shares of are bought back by the issuing company. Purchasing back one's own with cash reduces the amount of the stock on the open market available for public purchase. This transaction decreases total ____________ on the _________. Although buying back its own shares can significantly drain a company's __________, it is a very common transaction.
If a company buys 500 shares of another company on the open market, has it purchased treasury stock? _____________
The management team at your company has arrived at the following conclusions:
They want to distribute stock to employees through stock options.
Management wishes to augment the stock price by reducing supply of shares outstanding.
There is currently a high risk of a hostile takeover.
As a result of the previous conclusions, it will buy back 4,000 shares of its own at $57 per share.
Market Price..................x....Shares..................= Treasury Stock
$......................................shares...........................$
Use the given conclusions to complete the partial that follows.
Common stock.......................................................$300,000
Additional paid-in capital..............................................60,000
Total contributed capital............................................$360,000
Retained earnings...................................................1,800,000
Total contributed capital and retained earnings...............$2,160,000
Less: ___________...........................................___________
Total stockholders' equity...................................................$
APPLY THE CONCEPTS: Purchasing treasury stock
When a company decides to purchase treasury stock, the purchase is recorded at cost to reacquire the shares. On September 1, your company decides to purchase 2,000 shares of its $7 at the market price of $49. At this point, total shares issued is 6,000.
Increase Treasury Stock: $_______ x _______ shares = $________
Decrease Cash: An equal amount to the increase to Treasury Stock.
Journalize the September 1 transaction.
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+ Assets
+ Liabilities
+ Equity
+ Revenues/Gains
+ Expenses/Losses

GENERAL JOURNAL page DOC. POST. DATE ACCOUNT TITLE DEBIT CREDIT NO. REF. 1 Sep. 1 2 results are available, use up and do

APPLY THE CONCEPTS: Sale of treasury stock above cost
On October 20, your company has decided to sell off 800 shares of the treasury stock that it had previously purchased for $49 per share. The current market value of the stock and the price at which the company will resell these shares is $59 per share.
Increase Cash: $_________ x _________ shares = $________
Decrease Treasury Stock: $___________ x ________ shares = $________
Increase Paid-In Capital, Treasury Stock: $___________ - $__________ = $__________
Hide
Journalize the October 1 transaction. If an amount box does not require an entry, leave it blank or enter "0".

GENERAL JOURNAL page DOC, NO. POST. DATE ACCOUNT TITLE REF. DEBIT CREDIT Oct. 20 3 3

APPLY THE CONCEPTS: Sale of treasury stock below cost
It is now November 10, and your company has once again decided to resell some of the treasury stock purchased in September. Unfortunately, the share price has taken a hit, and the shares cannot be sold at the same price at which they were purchased. The company will sell 1,200 shares for the current market price of $39. Keep in mind that these shares were initially re-purchased by the company for $49 per share.
Increase Cash: $___________ x _________ shares = $_________
Decrease Paid-In Capital, Treasury Stock by the difference between the cost (__________ x __________ = ________) and the reissue price of the treasury stock to the extent that this account has a balance (the balance was calculated when shares were sold above cost in the previous part ) : $____________
Decrease Retained Earnings to the extent that Paid-In Capital, Treasury Stock is insufficient to cover the difference between the cost and the reissue price of the stock to be resold: $__________ - $_________ - $________ = $________
Decrease Treasury Stock: $________ x __________ = $_________
Hide
Journalize the November 10 transaction. If an amount box does not require an entry, leave it blank or enter "0".

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