Question

g During fiscal 2011, we repurchased with cash (i.e., bought) 2 million shares of common stock for an aggregate purchase cost of $700 million. We reissued (i.e., sold) 5 million shares of common stock held in treasury for $2000 million in cash during fiscal 2011. The cost basis of the 5 million shares of treasury stock reissued is $300 per share. What journal entries did ALM record in its treasury stock transactions in 2011

Answer 1

Answer:

Dr. Treasury Stock $700 million

Cr.  Cash                 $700 million

Dr.  Cash                                          $2,000 million

Cr. Add-in-Capital Treasury Stock $500 million

Cr. Treasury Stock                          $1,500 million

Explanation:

Treasury stocks are the company's own shares which is repurchased by the company. It is recorded in treasury shares account which is an contra equity account. I can be reissued or cancelled by the company.

Purchase of Treasury Stock

Treasury Stock = $700 million

Sales of Treasury Stock

Cash Receipt = $2,000

Treasury Stock = 5 million x $300 = $1,500

Paid-in capital - Treasury stock = $2,000 - $1,500 = $500