Fechter had the following stockholders’ equity accounts on January 1, 2020: ($5 par) $500,000, Paid-in Capital in Excess of Par-Common Stock $200,000, and Retained Earnings $100,000. In 2020, the company had the following treasury stock transactions.
Mar. 1 Purchased 5,000 shares at $8 per share.
June 1 Sold 1,000 shares at $12 per share.
Sept. 1 Sold 2,000 shares at $10 per share.
Dec. 1 Sold 1,000 shares at $7 per share.
Fechter uses the cost method of accounting for treasury stock. In 2020, the company reported net income of $30,000.
Instructions
a. Journalize the treasury stock transactions, and prepare the closing entry at December 31, 2020, for net income.
b. Open accounts for (1) Paid-in Capital from Treasury Stock, (2) Treasury Stock, and (3) Retained Earnings. (Post to T-accounts.)
c. Prepare the stockholders’ equity section for Fechter at December 31, 2020.
