Question: problem 183 reacquired sharescomparison of retired shares and treasury shares...
Problem 18-3 Reacquired shares-comparison of retired shares and treasury shares [LO18-5]
National Supply’s shareholders’ equity included the following
accounts at December 31, 2017:
|Shareholders' Equity||($ in millions)|
|Common stock, 9 million shares at $1 par||$||9,000,000|
|Paid-in capital—excess of par||63,000,000|
1. National Supply reacquired shares of its common stock in two separate transactions and later sold shares. Prepare the entries for each of the transactions under each of two separate assumptions: the shares are (a) retired and (b) accounted for as treasury stock.
|February 15, 2018||Reacquired 400,000 shares at $10 per share.|
|February 17, 2019||Reacquired 400,000 shares at $7.50 per share.|
|November 9, 2020||Sold 275,000 shares at $9 per share (assume FIFO cost).|
2. Prepare the shareholders’ equity section of National Supply’s balance sheet at December 31, 2020, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $16 million in 2018, $18 million in 2019, and $20 million in 2020. No dividends were paid during the three-year period.