Treasury Stock Review Problem
FIFO Cost
Weighted-average Cost,
Par-value Methods
The Problem
Before Jones Corporation engaged in the treasury stock
transactions listed below, its general ledger reflected,
among others, the following account balances.
Paid-in capital in excess of par $4,100,000
Common stock (par value of $10.00) 2,600,000
Retained earnings 1,405,600
The Problem
Jones Corporation had the following treasury stock
transactions:
Feb. 26: Bought 3,000 shares of treasury stock at $20 per share.
Aug. 14: Bought 6,600 shares of treasury stock at $28 per share.
Dec. 4: Sold 7,300 shares of treasury stock at $30 per share.
Instructions:
1. Record the Feb. 26 treasury stock purchase above using
the FIFO cost method.
Feb. 26: Bought 3,000 shares of treasury stock at $20 per share.
Date FIFO Cost Method Debits Credits
Feb. 26 Treasury Stock (3,000 x $20) 60,000
Cash 60,000
Instructions:
2. Record the Aug. 14 treasury stock purchase above using
the par value method.
Aug. 14: Bought 6,600 shares of treasury stock at $28 per
share.
Date Par Value Method Debits Credits
Aug. 14 Treasury Stock (6,600 x $10) 66,000
Paid-in capital - CS [plug] 118,800
Cash (6,600 x $28) 184,800
Instructions:
3. Record the Dec. 4 treasury stock sale using the FIFO
cost method.
Dec. 4: Sold 7,300 shares of treasury stock at $30 per share.
Date FIFO Cost Method Debits Credits
Dec. 4 Cash (7,300 x $24) 175,200
Paid-in Capital from Treasury Stock 5,200
Treasury Stock 180,400
[(3,000 x $20) + (4,300 x $28)]
Instructions:
4. Record the Dec. 4 treasury stock sale using the par
value method.
Dec. 4: Sold 7,300 shares of treasury stock at $ 30 per share.
Date Par Value Method Debits Credits
Dec. 4 Cash (7,300 x $24) 175,200
Treasury Stock (7,300 x $10) 29,200
Paid-in capital in excess of par 146,000
Instructions:
5. Record the Dec. 4 treasury stock sale using the
weighted-average cost method.
Dec. 4: Sold 7,300 shares of treasury stock at $ 30 per share.
Date Weighted-Average Cost Method Debits Credits
Dec. 4 Cash (7,300 x $24) 175,200
Paid-in Capital from Treasury Stock 10,950
Treasury Stock (7,300 x $25.50) 186,150
[(3,000 x $20)+(6,600 x $28)] ÷ 9,600 = $25.50
The End