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13 October, 12:02

Sprinkle Inc. has outstanding 10,000 shares of $10 par value common stock. On July 1, 2020, Sprinkle reacquired 100 shares at $87 per share. On September 1, Sprinkle reissued 60 shares at $90 per share. On November 1, Sprinkle reissued 40 shares at $83 per share.

Prepare Sprinkle's journal entries to record these transactions using the cost method.

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  1. 13 October, 12:05
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    July 1, 2020

    Dr. Treasury Shares $8,700

    Cr. Cash $8,700

    September 1, 2020

    Dr. Cash $5,400

    Cr. Treasury Shares $5,220

    Cr. Paid-In-Capital Treasury Stock $180

    November 1, 2020

    Dr. Cash $3,320

    Dr. Paid-In-Capital Treasury Stock $160

    Cr. Treasury Shares $3,480

    Explanation:

    Treasury stock is the share of the company issued earlier and bought-back. It can be reissued and cancelled by the company.

    Treasury Shares = 100 x $87 = $8,700

    Issuance

    All the difference in the issuance of treasury stock will be transferred to Paid-In-Capital Treasury Stock account.

    September 1, 2020

    Proceeds = 60 x $90 = $5,400

    Cost = 60 x $87 = $5,220

    Paid-In-Capital Treasury Stock = $5,400 - $5,220 = $180

    November 1, 2020

    Proceeds = 40 x $83 = $3,320

    Cost = 40 x $87 = $3,480

    Paid-In-Capital Treasury Stock = $5,400 - $5,220 = $180
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