Question

Journalize the following transactions of the Dot Corporation. Add formulas next to the accounts in th "explanation" area. Post to the accounts. 5.000 a 20,000-10000 120 00 Jan 2 Issued 15,000 shares of $2 par value common stock for $150,000. Common Stock Aug 5 Purchased 2,000 shares of its common stock for $15 per share for the treasury. 2.000 15 = 30,000 250, Sep 15 Sold 1,000 shares of treasury stock for $17 per share. 1000x17517,00 2 . Dec 17 Sold 1,000 treasury shares for $12 per share. 1000 X12 = 12.000 Dec 31 Issued 10,000 shares of $2 par value common stock for $20 per share, 210,00020,000 20X1OOO = 200,000 Dec 31 Closed net income of $275,000. Paid-in Capital in Exc Date Explanation & Formulas Debit Credit of PV-Common Stc 1 1/2 Cash 150.000 375 Common Stock $2 suulul 120 30,000 I 16 Paid-in Coill Commy Shah 120,00 75 Troury Stick 30,000 - Cash 130,000 Treasury Stock 1700 30,000 150 Trensure stock 1000x15 115,000 IS Pridrin Cihl Treiwen, Stock 2.02. 12/17 Cash (L, Paid in Capihl Treasury Stich 200D L Rehind Earnings Yes! 1," - Treasure Stack = same one Paid-in Capital fr 12/31 Cash 200,000 Treasury Stoc 20JD 2,000 12.04 Pe ciel.com Shock 16O, JO 12/31 Income Summary Retired Earnings 15,000 IS هایی در 12 ماه برای یادگا 275.000 27 de Retained Earni دادا neareaquisition cost de sale pricelarchest) 000017= 11.000 1000 € 15 : 15.000 10000.2= 12.000 C15 15,000 above COUL below cost

How come there are retained earnings on 12/17 but not 10/15?

Answer 1

In case Treasury stocks are issued at less than cost ,any loss is first debited to paid in capital in excess of cost from treasury stock (if available )and remaining excess loss is debited to retained earning.

Date	Account title	Debit	credit
12/17	cash (1000*12)	12000
	paid in capital treasury stock	2000
	Retained earning	1000
	Treasury stock (1000*15)		15000

In the given scenario , A treasury stock that cost $ 15 per share is sold for $ 12 resulting in loss of 15-12 =$ 3 per share or 3*1000=3000.

There is a balance in paid in capital treasury stock from reissue on 9/15 amounting to 2000 .Therefore the loss of 3000 will be first set off from paid in capital ,treasury stock and then rest is debited to retained earning .

case 2)

Date	Account title	Debit	credit
10/15	cash (1000*13)	13000
	paid in capital treasury stock	2000
	Treasury stock (1000*15)		15000

In the given scenario , A treasury stock that cost $ 15 per share is sold for $ 13 resulting in loss of 15-13 =$ 2 per share or 2*1000=2000.

There is a balance in paid in capital treasury stock from reissue on 8/15 amounting to 3000 .Therefore the entire loss of 2000 will be set off from paid in capital ,treasury stock .