# On May 27, Mama Mia Inc. reacquired 6,700 shares of its common stock at \$19 per share. On August ...

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On May 27, Mama Mia Inc. reacquired 6,700 shares of its common stock at \$19 per share. On August 3, Mama Mia sold 2,800 of the reacquired shares at \$22 per share November 14, Mama Mia sold the remaining shares at \$18 per share. Journalize the transactions of May 27, August 3, and November 14. For a compound transaction, if an amount box does not require an entry, leave it blank. May 27 Aug. 3 Nov. 14
Using the following accounts and balances, prepare the Stockholders' Equity section of the balance sheet using Method 1 of Exhibit 8. 30,000 shares of common stock authorized, and 2,000 shares have been reacquired. Common Stock, \$70 par Paid-In Capital from Sale of Treasury Stock Paid-In Capital in Excess of Par-Common Stock Retained Earnings Treasury Stock \$1,470,000 29,000 378,000 853,000 13,000 Stockholders' Equity Paid-In Capital Total Paid-in Capital Total Total Stockholders' Equity

Solution

Mama Mia

Journal Entries

 Date Account Titles and Explanation Ref. No. Debit Credit May 27, Treasury Stock \$127,300 Cash \$127,300 (To record reacquisition of 6,700 shares at \$19 each) Aug 3, Cash \$61,600 Paid-in Capital in Excess of Par \$8,400 Treasury Stock \$53,200 (To record sale of reacquired shares at \$22 each) Nov 14, Cash \$70,200 Paid-in Capital in Excess of Par \$3,900 Treasury Stock \$74,100 (To record sale of reacquired shares at \$18 each)

Computations:

Cost of reacquired shares on May 27 = 6,700 x \$19 = \$127,300

Cost of sale of 2,800 reacquired shares on Aug 3, = 2,800 x \$19 = \$53,200

Sale value = 2,800 x \$22 = \$61,600

Paid-in Capital in excess of par = 2,800 x (22 -19) = \$8,400

Treasury stock = 2,800 x 19 = \$52,200

Cost of sale of remaining treasury stock = 6,700 – 2,800 = 3,900 shares

Sale value = 3,900 x \$18 = \$70,200

Paid-in capital in excess of par (debit)      = \$3,900

Cost of shares = 3,900 x \$19 = \$74,100

Stockholders’ Equity

 Stockholders' Equity Paid-in Capital Common Stock \$70 par, shares authorized 30,000; 21,000 issued and outstanding \$1,470,000 Paid in Capital from sale of treasury stock \$33,500 Paid-in Capital in excess of Par - Common Stock \$378,000 Total paid-in Capital \$1,881,500 Retained Earnings \$853,000 Treasury Stock (\$13,000) Total Stockholders' Equity \$2,721,500

Note:

Paid in capital from sale of treasury stock –

Beg. Balance = \$29,000

Add: Excess of sale value over cost for 2,800 treasury shares = \$8,400

Less: excess of cost over sale value for 3,900 treasury shares = (\$3,900)

Paid in capital from sale of treasury stock, ending balance = \$33,500

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