This activity requires teamwork to reinforce understanding of accounting for treasury stock.
1. Write a brief team statement
(a) Generalizing what happens to a corporation’s financial position when it engages in a stock “buyback” and
(b) Identifying reasons why a corporation would engage in this activity.
2. Assume that an entity acquires 100 shares of its $100 par value common stock at a cost of $134 cash per share. Discuss the entry to record this acquisition. Next, assign each team member to prepare one of the following entries (assume each entry applies to all shares):
a. Reissue treasury shares at cost.
b. Reissue treasury shares at $150 per share.
c. Reissue treasury shares at $120 per share; assume the paid-in capital account from treasury shares has a $1,500 balance.
d. Reissue treasury shares at $120 per share; assume the paid-in capital account from treasury shares has a $1,000 balance.
e. Reissue treasury shares at $120 per share; assume the paid-in capital account from treasury shares has a zero balance.
3. In sequence, each member is to present his/her entry to the team and explain the similarities and differences between that entry and the previous entry.