Fouts Corporation purchased 2,600 shares of its $11 par value common stock for $174,200 on August 1. It will hold these shares in the treasury until resold. On December 1, the corporation sold 1,560 shares of treasury stock for cash at $72 per share.
Journalize the treasury stock transactions.
I've got the account titles, but I am confused on how to calculate the debit and credit.
Thank you in advance.
Prof
Are you asking for help or are you asking for a solution to your homework? If you want help, you should show your work and you can get help. If you just want someone to do your work, that is not help, you would learn nothing and it would be a disservice to you. Using another person's solution is plagiarism and is unethical. You could at least make an attempt at answering the questions.
Where are your account titles? How can you expect help without doing anything?
dr. Treasury stock . . 174,200
cr. . . . .Cash . . .174,200
You really don't know how to do the above? You are in serious trouble. Consider dropping the class.
dr . .Cash . . .112,320
cr. . . . .Treasury stock . . .104,520
cr . . . . xxxxxxxxx . . . . . . . 7,800. . . . .
Where did 104,520 come from? Any idea? If not, definitely drop the class. And where did 7,800 come from? Hint; it balances the entry.
The real trick is knowing how to label that last credit. Looks like a gain. And if it were a debit it would look like a loss. But a corporation cannot gain or lose by trading with its owners. The rules are:
The "gain" is credited to additional paid-in capital. The view is that some shareholders contributed more to the permanent capital of the corporation. It does not go into retained earnings because retained earnings can be distributed as dividends, and you cannot distribute as dividends the permanent capital invested by shareholders.
The "loss" is debited to retained earnings. The view is that by buying share at one price and selling them at a lower price, the company distributed some capital to shareholders, so it has to reduce retained earnings.
I hope this helps. In the future when you need help, don't assign the problem for others to solve. do at least a minimum amount of work, so someone can help you.