Question

Rolex Company was involved in the following treasury stock transactions during 2014:
a. Purchased 80,000 shares of its $1 par value common stock on the market for $2.50 per share.
b. Purchased 16,000 shares of its $1 par value common stock on the market for $2.80 per share.
c. Sold 44,000 shares purchased in (a) for $131,000.
d. Sold the other 36,000 shares purchased in (a) for $72,000.
e. Sold 6,000 of the remaining shares of treasury stock for $1.60 per share.
f. Retired all the remaining shares of treasury stock. All shares originally were issued at $1.50 per share.

Required
1. Record the treasury stock transactions using T accounts.
2. What is the reasoning behind treating the purchase of treasury stock as a reduction in stockholders’ equity as opposed to treating it as an investment asset?



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  • CreatedMarch 26, 2014
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