Question

Morris & Butler is a large discount brokerage firm. On December 31, 2008, the stockholders’ equity section of the company’s balance sheet indicated that 65,000 shares of the company’s common stock were being held as treasury stock. This treasury stock had been acquired for $1,950,000 in a single transaction. The company’s common stock has a par value of $0.10 per share.
Required:
(a) Why do companies sometimes reacquire stock that they have previously issued?
(b) Prepare the journal entry to record the purchase of the treasury stock.
(c) Assume that Morris & Butler sold 2,000 shares of its treasury stock on April 3, 2009, for $35 per share. Prepare the journal entry to record the sale of the treasury stock.
(d) Assume that on May 31, 2009, Morris & Butler sold another 3,000 shares of its treasury stock for $27 per share. Prepare the journal entry to record the sale of the treasury stock.
(e) Why is treasury stock not classified as an asset?


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  • CreatedMarch 27, 2015
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