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19 July, 08:03

As of the end of Year 1, the shareholders' equity of Philip Corporation consisted of: Common stock, 80,100 shares at $1 par $ 80,100 Paid-in capital-excess of par 168,210 Retained earnings 121,000 At the beginning of Year 2, the company repurchased and retired 1,100 shares at $8.10 per share. Prepare the appropriate journal entry for the repurchase and retirement of the shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 19 July, 08:05
    0
    There are two journal entries to record the repurchase and retirement of the shares:

    * To record the share repurchased:

    Dr Treasury stock 8,910

    Cr Cash 8,910

    * To record the retirement of share repurchased:

    Dr Common stock 1,100

    Dr Paid-in capital common stock 2,310

    Dr Retained Earning 5,500

    Cr Treasury stock 8,910

    Explanation:

    Working note:

    * To record the share repurchased:

    The Treasury stock account is debited at the amount equals to the cash paid for stock repurchased, thus, offsetting entry is credit Cash account = Number of share repurchased * Price purchase = 1,100 * 8.1 = $8,910

    * To record the retirement of share repurchased:

    Common stock account is debited at the amount = Par value * Share retired = 1 * 1,100 = $1,100

    As one common stock is carried $2.1 value excess of par (which is calculated as 168,210 / 80,100); paid-in capital account is debited by $2,310 (1,100 * 2.1)

    Retained earning is debited by the amount calculated as: Number of share retired * (Price at retired - Par value - Excess of par value) = 1,100 * (8.1 - 1-2.1) = $5,500

    Treasury account is debited $8,910 to bring the balance of this account to zero as stocks repurchased are fully retired.
  2. 19 July, 08:18
    0
    Treasury Stock 8,910 debit

    Cash 8,910 credit

    For the purchase of treasury Stock

    Common Stock 1,100 debit

    Paid-in Capital__excess of par 7,810 debit

    Treasury Stock 8,910 credit

    For the retirement of the stocks

    Explanation:

    First the company will recognize the treasury Stock.

    1,100 shares at 8.10 = 8,910

    Then it will write-off the treasury stock against common stock and Paid-in Capital__excess of par

    common stock will decrease by their face value

    1,100 shares x 1 = 1,100

    The diference will be taked from Pai-in Capital - - excess of par

    8,910 - 1,100 = 7,810
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