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18 July, 14:58

Common stock-$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding $ 400,000 Paid-in capital in excess of par value, common stock 60,000 Retained earnings 270,000 Total stockholders' equity $ 730,000 In year 2017, the following transactions affected its stockholders' equity accounts. Jan. 1 Purchased 4,000 shares of its own stock at $20 cash per share. Jan. 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record. Feb. 28 Paid the dividend declared on January 5. July 6 Sold 1,500 of its treasury shares at $24 cash per share. Aug. 22 Sold 2,500 of its treasury shares at $17 cash per share. Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.

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  1. 18 July, 17:17
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    treasury stock 80,000 debit

    cash 80,000 credit

    dividends 72,000 debit

    dividends payable 72,000 credit

    dividends payable 72,000 debit

    cash 72,000 credit

    cash 36,000

    treasury stock 30,000 credit

    add paid-in TS 6,000 credit

    cash 42,500 debit

    add paid-in TS 6,000 debit

    retained earnings 1,500 debit

    treasury stock 50,000 credit

    dividends 80,000 debit

    dividends payable 80,000 credit

    dividends payable 80,000 debit

    cash 80,000 credit

    Explanation:

    Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record

    Jan 1st: The treasury stock are recorded at cost

    Jan 5th

    40,000 - 4,000 = 36,000 shares outstanding

    x 2 dividend per share

    dividends 72,000

    Feb 28th we write-off the payable and decrease cash

    July 6th

    proceeds 1,500 x $24 = 36,000

    cost 1,500 x $20 = 30,000

    additional paid-in 6,000

    August 22

    proceeds 2,500 x $17 = 42,500

    cost 2,500 x $20 = 50,000

    "loss" (7,500)

    we cannot declare loss when selling own share, we first decrease the additional paid-in treasury stock and if needed like in this case; we decrease retained earings

    Sep 5th

    there are 40,000 outstanding x $2 = 80,000

    Oct 28th we write-off the payable and decrease cash
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