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Problem 18-3 Reacquired shares-comparison of retired shares and treasury shares [LO18-5] National Supply’s shareholders’ equity included the...

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Accounting

Problem 18-3 Reacquired shares-comparison of retired shares andtreasury shares [LO18-5]

National Supply’s shareholders’ equity included the followingaccounts at December 31, 2017:

Shareholders' Equity($ in millions)
Common stock, 9 million shares at $1 par$9,000,000
Paid-in capital—excess of par63,000,000
Retained earnings92,500,000


Required:
1. National Supply reacquired shares of its commonstock in two separate transactions and later sold shares. Preparethe entries for each of the transactions under each of two separateassumptions: the shares are (a) retired and (b) accounted for astreasury stock.

February 15, 2018Reacquired 400,000 shares at $10 per share.
February 17, 2019Reacquired 400,000 shares at $7.50 per share.
November 9, 2020Sold 275,000 shares at $9 per share (assume FIFO cost).


2. Prepare the shareholders’ equity section ofNational Supply’s balance sheet at December 31, 2020, assuming theshares are (a) retired and (b) accounted for as treasury stock. Netincome was $16 million in 2018, $18 million in 2019, and $20million in 2020. No dividends were paid during the three-yearperiod.

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