Reacquired shares—comparison of retired shares and treasury shares
National Supply’s shareholders’ equity included the following accounts at December 31, 2010:
| Shareholders’ Equity | ($ in millions) |
| Common stock, 6 million shares at $1 par | $ 6,000,000 |
| Paid-in capital—excess of par | 30,000,000 |
| Retained earnings | 86,500,000 |
Required:
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
Feb. 15, 2011 Reacquired 300,000 shares at $8 per share
Feb. 17, 2011 Reacquired 300,000 shares at $5.50 per share
Nov. 9, 2011 Sold 200,000 shares at $7 per share (assume FIFO cost)
2. Prepares the shareholders’ equity section of National Supply’s balance sheet at December 31, 2013, assuming the shares are (a) retired and (b) accounted for as treasury stock. Net income was $14 million in 2011, $15 million in 2012, and $16 milion in 2013. No dividends were paid during the three year period.
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