Rinehart Corporation purchased from its stockholders 5,000 shares of its own previously issued stock for $255,000. It later resold 2,000 shares for $54 per share, then 2,000 more shares for $49 per share, and finally 1,000 shares for $43 per share. Prepare journal entries for the purchase of the treasury stock and the three sales of treasury stock.

Dr Treasury Stock $255,000

Cr Cash $255,000

Dr Cash $108,000

Cr Treasury Stock $98,000

Cr Additional paid-in-capital (treasury stock)$10,000

Dr Cash $98,000

Cr Additional paid-in-capital (treasury stock)$10,000

Cr Treasury Stock $88,000

Dr Cash $43,000

Cr Common Stock $43,000

Explanation:

Preparation of the journal entries for the purchase of the treasury stock and the three sales of treasury stock.

Purchase

Dr Treasury Stock $255,000

Cr Cash $255,000

(Being to record purchase from stockholders)

Sale 1

Dr Cash $108,000

(2000*54)

Cr Treasury Stock $98,000

(2000*49)

Cr Additional paid-in-capital (treasury stock)$10,000

($108,000-$98,000

(Being To record sales of shares at $54 per share.)

Sale 2

Dr Cash $98,000

Cr Additional paid-in-capital (treasury stock)$10,000

Cr Treasury Stock $88,000

($98,000-$10,000)

(Being to record sale of shares at 49 per share )

(2000*49)

Sale 3

Dr Cash $43,000

Cr Common Stock $43,000

(1,000 shares for $43 per share)

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