Treasury Stock Transactions The Stockholders Equity category of Little Joes balance sheet on January 1, 2010, appeared

Question:

Treasury Stock Transactions The Stockholders’ Equity category of Little Joe’s balance sheet on January 1, 2010, appeared as follows:

Common stock, $5 par, 40,000 shares issued and outstanding ....$200,000

Additional paid-in capital ................... 90,000

Retained earnings ..................... 100,000

Total stockholders’ equity ...................$390,000

The following transactions occurred during 2010:

a. Reacquired 5,000 shares of common stock at $20 per share on February 1.

b. Reacquired 1,200 shares of common stock at $13 per share on March 1.

Required

1. Identify and analyze the effect of each transaction.

2. Assume that the treasury stock was reissued on October 1 at $12 per share. Did the company benefit from the treasury stock reissuance? Where is the “gain” or “loss” presented on the financial statements?

3. What effect did the two transactions to purchase treasury stock and the later reissuance of that stock have on the Stockholders’ Equity section of the balance sheet?

Common Stock
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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...