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ACCT 23020 Lecture Notes - Lecture 37: Treasury Stock, Target Corporation, Pr Newswire

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emmagennaro
3 Feb 2020
School
Kent State University
Department
Accounting
Course
ACCT 23020
Professor
Wendy M.Tietz

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Document Summary

Learning objective 3: explain how treasury stock affects a company. Treasury stock: issued shares reacquired by the company, contra-equity account with debit balance, treasury stock is recorded at cost. Treasury stock transactions: buying, buying treasury stock. Assets and equity decrease by an amount equal to the cost of treasury stock purchased: reselling, reselling treasury stock. Assets and equity increase by an amount equal to the sale price of the treasury stock sold: retiring, retiring treasury stock. Treasury stock is removed from both common stock and the treasury: issuing, issuing stock for employee compensation. Expenses are increased, common stock is increased for the par value of the shares, and additional paid-in capital is increased for the difference. Number of shares: authorized: maximum number of shares a company is allowed to issue under its charter, issued: the number of shares the company has issued to its stockholders, outstanding: the number of shares that stockholders own.

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Related Questions

On October 10, the stockholders’ equity of Sherman Systems appears as follows.
Common stock–$10 par value, 94,000 shares
authorized, issued, and outstanding		 $ 940,000
Paid-in capital in excess of par value, common stock 326,000
Retained earnings 1,040,000
Total stockholders’ equity $ 2,306,000

1. Prepare journal entries to record the following transactions for Sherman Systems.

  1. Purchased 7,200 shares of its own common stock at $47 per share on October 11.
  2. Sold 1,550 treasury shares on November 1 for $53 cash per share.
  3. Sold all remaining treasury shares on November 25 for $42 cash per share.

Journal entry worksheet-

Record the purchase of 7,200 shares of its own common stock for $47 cash per share.

Record the reissue of 1,550 shares of the treasury stock for $53 cash per share.

Record the reissue of the remaining shares of the treasury stock for $42 cash per share.

Comprehensive The shareholders' equity section of SuperiorCorporation's balance sheet as of December 31, 2012, is as follows:Shareholders’ Equity Preferred stock, $100 par value; authorized,150,000 shares; issued, 15,000 shares $1,500,000 Common stock, $5par value; authorized, 1,000,000 shares; issued, 200,000 shares1,000,000 Paid-in capital in excess of par—preferred 75,000 Paid-incapital in excess of par—common 425,000 Retained earnings 3,000,000$6,000,000 The following events occurred during 2013: Jan. 5 10,000shares of authorized and unissued common stock were sold for $10per share. Jan. 16 10,000 shares of authorized and unissuedpreferred stock were sold for $108 per share. April 1 80,000 sharesof common stock were repurchased for the treasury at a price of $15per share. Superior uses the cost method to account for treasurystock. Sept. 1 4,000 shares of preferred stock are issued inexchange for a piece of land. The land has an appraised value of$439,000. The preferred stock currently trades on the New YorkStock exchange at a price of $108 per share. Dec. 1 30,000 sharesof treasury stock are reissued at a price of $20 per shareRequired: Hide 1. Prepare journal entries for each of the abovetransactions. For a compound transaction, if an amount box does notrequire an entry, leave it blank. Jan. 5 Cash 100,000 Common Stock50,000 Additional Paid-in Capital on Common Stock 50,000 Jan. 16Cash 1,080,000 Preferred Stock 1,000,000 Additional Paid-in Capitalon Preferred Stock 80,000 April 1 Treasury Stock 1,200,000 Cash1,200,000 Sept. 1 Land 432,000 Preferred Stock 400,000 AdditionalPaid-in Capital on Preferred Stock 32,000 Dec. 1 Cash 600,000Treasury Stock 450,000 Additional Paid-in Capital on Treasury Stock150,000 Hide Feedback Correct Check My Work Feedback When a companyissues common (or preferred) stock for cash, you should record thetotal par value (Number of Shares x Par Value per Share) in theCommon (or Preferred) Stock account, with any excess recorded asAdditional Paid-in Capital. Under the cost method, when thecorporation reacquires its capital stock you should debit anaccount entitled Treasury Stock (and credit Cash or otherappropriate asset accounts) for the cost paid to reacquire theshares. When the corporation reissues the treasury shares, youshould reduce (credit) the Treasury Stock account for the cost ofthe shares reissued and record the difference between the cashreceived and the cost of the reissued shares as an adjustment ofshareholders' equity. If the cash received exceeds the cost of thereissued treasury stock, you should record the excess as anincrease in additional paid-in capital from treasury stock. If thecash is less than the cost, you should record the "deficit" as areduction of additional paid-in capital from treasury stock. If theadditional paid-in capital from treasury stock is insufficient toabsorb the deficit, you should record the remainder as a reductionin retained earnings. If a company issues capital stock forservices or assets other than cash, you should record thetransaction at the fair value of the stock issued or the noncashconsideration received, whichever is more representationallyfaithful. 2. Calculate the number of authorized, issued, andoutstanding common shares as of December 31, 2013. Authorizedcommon shares: 1,000,000 shares Issued shares: 210,000 sharesOutstanding shares: 160,000 shares Hide Feedback Correct Check MyWork Feedback Authorized capital stock is the number of shares ofcapital stock (both preferred and common) that a corporation mayissue as stated in its corporate charter. Issued capital stock isthe number of shares of capital stock that a corporation has issuedto its shareholders as of a specific date. Outstanding capitalstock is the number of shares of capital stock that a corporationhas issued to shareholders and that are still being held byshareholders as of a specific date. 3. Calculate Superior's legalcapital at December 31, 2013.

[The following information applies to the questions displayed below.]

The equity sections from Atticus Group’s 2016 and 2017 year-end balance sheets follow.

Stockholders’ Equity (December 31, 2016)
Common stock—$5 par value, 100,000 shares
authorized, 35,000 shares issued and outstanding		 $ 175,000
Paid-in capital in excess of par value, common stock 135,000
Retained earnings 340,000
Total stockholders’ equity $ 650,000
Stockholders’ Equity (December 31, 2017)
Common stock—$5 par value, 100,000 shares
authorized, 41,200 shares issued, 4,000 shares in treasury		 $ 206,000
Paid-in capital in excess of par value, common stock 190,800
Retained earnings ($30,000 restricted by treasury stock) 400,000
796,800
Less cost of treasury stock (30,000 )
Total stockholders’ equity $ 766,800


The following transactions and events affected its equity during year 2017.

Jan. 5 Declared a $0.50 per share cash dividend, date of record January 10.
Mar. 20 Purchased treasury stock for cash.
Apr. 5 Declared a $0.50 per share cash dividend, date of record April 10.
July 5 Declared a $0.50 per share cash dividend, date of record July 10.
July 31 Declared a 20% stock dividend when the stock’s market value was $14 per share.
Aug. 14 Issued the stock dividend that was declared on July 31.
Oct. 5 Declared a $0.50 per share cash dividend, date of record October 10.

Problem 13-4A Part 1

Required:
1. How many common shares are outstanding on each cash dividend date?

The following information applies to the questions displayed below.]

The equity sections from Atticus Group’s 2016 and 2017 year-end balance sheets follow.

Stockholders’ Equity (December 31, 2016)
Common stock—$5 par value, 100,000 shares
authorized, 35,000 shares issued and outstanding		 $ 175,000
Paid-in capital in excess of par value, common stock 135,000
Retained earnings 340,000
Total stockholders’ equity $ 650,000
Stockholders’ Equity (December 31, 2017)
Common stock—$5 par value, 100,000 shares
authorized, 41,200 shares issued, 4,000 shares in treasury		 $ 206,000
Paid-in capital in excess of par value, common stock 190,800
Retained earnings ($30,000 restricted by treasury stock) 400,000
796,800
Less cost of treasury stock (30,000 )
Total stockholders’ equity $ 766,800


The following transactions and events affected its equity during year 2017.

Jan. 5 Declared a $0.50 per share cash dividend, date of record January 10.
Mar. 20 Purchased treasury stock for cash.
Apr. 5 Declared a $0.50 per share cash dividend, date of record April 10.
July 5 Declared a $0.50 per share cash dividend, date of record July 10.
July 31 Declared a 20% stock dividend when the stock’s market value was $14 per share.
Aug. 14 Issued the stock dividend that was declared on July 31.
Oct. 5 Declared a $0.50 per share cash dividend, date of record October 10.

Problem 13-4A Part 2

2. What is the total dollar amount for each of the four cash dividends?