Question

Rinehart Corporation purchased from its stockholders 5,000 shares of its own previously issued stock for $255,000. It later resold 2,000 shares for $54 per share, then 2,000 more shares for $49 per share, and finally 1,000 shares for $43 per share. Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Answer:

Purchase

Treasury Stock $255,000 (debit)

Cash $255,000 (credit)

Sale 1.

Cash $108,000 (debit)

Common Stock $108,000 (credit)

Sale 2.

Cash $98,000 (debit)

Common Stock $98,000 (credit)

Sale 3.

Cash $43,000 (debit)

Common Stock $43,000 (credit)

Explanation:

When a Company purchases its own shares

De-recognize the Assets of Cash and also de-recognize the Equity item Treasury Stock.

When a Company sales its own shares

Recognize the Assets of Cash and recognize the equity item Common Stock.