ACCT 3305
Treasury Stock Transactions -- Basic Company
CASE 1
The stockholders' equity section of Basic Corporation's balance sheet at December 31, 2013 appeared
as follows:
Common stock, $10 par, 100,000 shares authorized,
30,000 shares issued and outstanding
Capital in excess of par
Retained earnings
$300,000
30,000
220,000
$550,000
Basic's records show the following transactions in 2013 related to its common stock.
February 15
Reacquired 10,000 of its own outstanding common shares at $15 per share; the
shares will be held as treasury shares.
April 28
Sold 2,000 of its treasury shares at $17 per share.
August 17
Sold 3,000 of its treasury shares at $9 per share.
REQUIRED: Record the above described 2013 treasury stock transactions under each of the following
independent assumptions.
A.
Assuming Basic uses the cost method to account for its treasury stock transactions.
B.
Assuming Basic uses the par value method to account for its treasury stock transactions.
CASE 2
Assume the same facts and requirements as those in Case 1 except assume that Basic reacquired the
10,000 shares on February 15, 2013 at $10.50 per share rather than $15.
ACCT 3305
SOLUTION TO TREASURY STOCK -- BASIC COMPANY
CASE 1
COST METHOD
Feb. 15
Apr. 28
Aug. 17
TS (10,000 X 15)
Cash
PAR VALUE METHOD
150,000
150,000
TS (10,000 X 10)
APIC (1/3 of 30,000)
Retained earnings
Cash
100,000
10,000
40,000
Cash
TS (2,000 X 15)
APIC
34,000
Cash
Retained earnings
TS (3,000 X 10)
27,000
3,000
TS (10,000 X 10)
APIC (1/3 of 30,000)
Cash
APIC-TS
100,000
10,000
Cash
34,000
TS (2,000 X 10.50)
21,000
APIC-TS
13,000
Cash
TS (2,000 X 10)
APIC
34,000
Cash
27,000
APIC-TS
4,500
TS (3,000 X 10.50)
31,500
Cash
APIC-TS
TS (3,000 X 10)
27,000
3,000
Cash
TS (2,000 X 15)
APIC-TS
34,000
Cash
APIC-TS
Retained earnings
TS (3,000 X 15)
27,000
4,000
14,000
30,000
4,000
150,000
20,000
14,000
30,000
45,000
CASE 2
Feb. 15
Apr. 28
Aug. 17
TS (10,000 X 10.50) 105,000
Cash
105,000
105,000
5,000
20,000
14,000
30,000