Bush-Caine Company reported the following data on its December 31, 2006 balance sheet: Preferred stock, $50 par

Question:

Bush-Caine Company reported the following data on its December 31, 2006 balance sheet:

Preferred stock, $50 par $50,000

Common stock, $10 par $100,000

Additional paid-in capital on preferred stock 4,000

Additional paid-in capital on common stock 80,000

Retained earnings 95,000

The following transactions were reported by the company during 2007:

1. Reacquired 200 shares of its preferred stock at $57 per share.

2. Reacquired 500 shares of its common stock at $16 per share.

3. Sold 100 shares of preferred treasury stock at $58 per share.

4. Sold 200 shares of common treasury stock at $17 per share.

5. Sold 100 shares of common treasury stock at $9 per share.

6. Retired the shares of common stock remaining in the treasury.

The company maintains separate treasury stock accounts and related additional paid-in capital accounts for each class of stock.

Required

1. Prepare the journal entries required to record the treasury stock transactions using the cost method.

2. Assuming the company earned a net income in 2007 of $30,000 and declared and paid dividends of $10,000, prepare the stockholders’ equity section of its balance sheet at December 31, 2007.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...