Valencia Corporation entered into the following transactions: a) On February 1, Year 1, Valencia purchased for cash, in the open market, 4,000 shares of its own common stock at $40 per share.b) On September 1, Year 1, 800 of the shares purchased on February 1 were sold at $41 per share.Required:Prepare journal entries required for these transactions.
What will be an ideal response?
a) Cost of treasury stock acquired = 4,000 Shares acquired × Cost of $40 per share = $160,000
b) Cash increases by $32,800 (or 1,800 shares × $41 per share), treasury stock decreases by $32,000 (or 1,800 shares × Original cost of $40 per share), and paid-in capital in excess of cost of treasury stock increases by the difference of $800 (or $32,800 ? $32,000).
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