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Chapter 15: Question 8BE (page 811)

Sprinkle Inc. has outstanding 10,000 shares of \(10 par value common stock. On July 1, 2017, Sprinkle reacquired 100 shares at \)87 per share. On September 1, Sprinkle reissued 60 shares at \(90 per share. On November 1, Sprinkle reissued 40 shares at \)83 per share. Prepare Sprinkle’s journal entries to record these transactions using the cost method.

Short Answer

Expert verified

In Sprinkle Inc.’s book, the treasury stock should be credited with $3,480.

Step by step solution

01

Meaning of Per Share Price

The term price per share refers to the value of a single share asked by a company to sell shares to its potential investor to collect finance.

02

Preparing Sprinkle’s journal entries using the cost method

Date

Particular

Folio

Debit USD

$

Credit USD

$

01-07-2017

Treasury Stock (100$87) A/c Dr.

8,700

To Cash A/c Cr.

8,700

(being treasury stock issue)

01-09-2017

Cash A/c (60$90) Dr.

5,400

To Treasury Stock (60$87) A/c Cr.

5,220

To paid-in capital from Cr.

Treasury Stock A/c

180

(being treasury stock credited)

01-11-2017

Cash A/c (40$83) Dr.

3,320

Paid-in capital from Dr.

Treasury Stock A/c

160

To Treasury Stocks (40$87) Cr.

3,480

(being treasury stock transferred)

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Most popular questions from this chapter

Indicate how each of the following accounts should be classified in the Equity section.

  1. Share Capital—Ordinary.
  2. (b) Retained Earnings.
  3. Share Premium—Ordinary.
  4. Treasury Shares.
  5. Share Premium—Treasury
  6. Share Capital—Preference
  7. Accumulated Other Comprehensive Income.

Indicate how each of the following accounts should be classified in the stockholders’ equity section.

  1. Common Stock.
  2. Retained Earnings.
  3. Paid-in Capital in Excess of Par—Common Stock.
  4. Treasury Stock.
  5. Paid-in Capital from Treasury Stock.
  6. Paid-in Capital in Excess of Stated Value—Common Stock.
  7. Preferred Stock.

Briefly discuss the implications of the financial statement presentation project for the reporting of stockholders’ equity.

(Equity Transactions and Statement Preparation) On January 5, 2017, Phelps Corporation received a charter granting the right to issue 5,000 shares of \(100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of \)10 par value common stock. It then completed these transactions.

Jan. 11 Issued 20,000 shares of common stock at \(16 per share.

Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the

following assets: equipment with a fair value of \)50,000; a factory

building with a fair value of \(160,000; and land with an

appraised value of \)270,000.

July 29 Purchased 1,800 shares of common stock at \(17 per share. (Use cost

method.)

Aug. 10 Sold the 1,800 treasury shares at \)14 per share.

Dec. 31 Declared a \(0.25 per share cash dividend on the common stock and

declared the preferred dividend.

Dec. 31 Closed the Income Summary account. There was a \)175,700 net

income.

Instructions

  1. Record the journal entries for the transactions listed above.
  2. Prepare the stockholders’ equity section of Phelps Corporation’s balance sheet as of December 31, 2017.

In the absence of restrictive provisions, what are the basic rights of stockholders of a corporation?
See all solutions

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