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Treasury Stock Transactions

The Stockholders Equity category of Little Joes balance sheet on January 1, 2016, appeared as follows:

Common stock, $5 par, 40,000 shares issued and outstanding	$200,000
Additional paid-in capital	90,000
Retained earnings	100,000
Total stockholders equity	$390,000

Required:

1. Record the entries.

The following transactions occurred during 2016: a. Reacquired 4,600 shares of common stock at $20 per share on February 1. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Feb. 1

b. Reacquired 1,300 shares of common stock at $13 per share on March 1. Indicate the effect on financial statement items by selecting "" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Journal

Balance Sheet

Income Statement

Stockholders

Net

Date

Description

Debit

Credit

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

Mar. 1

2. Assume that the treasury stock was reissued on October 1 at $12 per share. Did the company benefit from the treasury stock reissuance? Where is the "gain" or "loss" presented on the financial statements?

(Less, More)(Loss, gain)(8,12, 20)(Reduces, increases)

The company sold treasury stock at amounts______ than those it had paid to reacquire the stock. In a sense, the company had a ______ of $______ per share on the stock purchased February 1 and $1 per share on the stock purchased March 1, but the "loss" is not shown on the income statement. Instead, the "loss" _____ stockholders' equity.

3. What effect did the two transactions to purchase treasury stock and the later reissuance of that stock have on the Stockholders' Equity section of the balance sheet?

Overall, stockholders' equity:

____________

(Increase decrease)

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