Problem 18-3 Reacquired shares-comparison of retired shares andtreasury shares [LO18-5]
National Supply’s shareholders’ equity included the followingaccounts 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 |
| Retained earnings | | 92,500,000 |
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Required:
1. National Supply reacquired shares of its commonstock in two separate transactions and later sold shares. Preparethe entries for each of the transactions under each of two separateassumptions: the shares are (a) retired and (b) accounted for astreasury 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). |
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2. Prepare the shareholders’ equity section ofNational Supply’s balance sheet at December 31, 2020, assuming theshares are (a) retired and (b) accounted for as treasury stock. Netincome was $16 million in 2018, $18 million in 2019, and $20million in 2020. No dividends were paid during the three-yearperiod.
