Question

Culver Corporation had the following stockholders’ equity accounts on January 1, 2020: Common Stock ($5 par) $550,000, Paid-in Capital in Excess of Par—Common Stock $195,000, and Retained Earnings $120,000. In 2020, the company had the following treasury stock transactions. Mar. 1 Purchased 5,500 shares at $8 per share. June 1 Sold 1,500 shares at $13 per share. Sept. 1 Sold 2,000 shares at $11 per share. Dec. 1 Sold 1,500 shares at $6 per share. Culver Corporation uses the cost method of accounting for treasury stock. In 2020, the company reported net income of $25,000.

Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2020, for net income. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 1

Answer 1

Journal entries

Dare	Account tittles and explanation	Debit	Credit
March 1	Treasury Stock a/c {5500*$8}	$44000
	To Cash a/c		$44000
June 1	Cash a/c {1500*$13}	$19500
	To Treasury stock a/c {1500*$8}		$12000
	To Paid-in-capital treasury stock a/c		$7500
September 1	Cash a/c {2000*$11}	$22000
	To treasury stock a/c {2000*$8}		$16000
	To Paid-in-capital treasury stock a/c		$6000
December 1	Cash a/c {1500*$6}	$9000
	Paid-in-capital treasury stock a/c	$3000
	To treasury stock a/c {1500*$8}		$12000
December 31	Income summary a/c	$25000
	To Retained earnings		$25000

Paid-in-capital Treasury Stock:

Particulars	Amount($)	Particulars	Amount($)
December 1	3000	June 1	7500
		September 1	6000
December 31 [Bal.fig]	10500
	13500		13500

Treasury stock

Particulars	Amount($)	Particulars	Amount($)
March 1	44000	June 1	12000
		September 1	16000
		December 1	12000
		Closing balance	4000
	44000		44000

Retained earnings

Particulars	Amount($)
Beginning balance	120000
Add: Net income	25000
Ending balance	145000

Culver Corporation

Balance Sheet (Partial)

December 31,2020

Particulars	Amount($)	Amount($)
Stockholders equity
Common stock		550000
Paid - in capital in excess of par- Common stock		195000
Paid - in capital from treasury stock		10500
Total contributed Capital		755500
Retained earnings	120000
Add: Net income of 2020	25000	145000
Less:Treasury stock		(4000)
Total Stockholders equity		896500

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