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Let's Talk About Treasury Stock

Let's Talk About Treasury Stock. an out of class less attempting to make-up for a snow day. Topics Covered. (click a link to jump to that part of the presentation). Exercise (used as inspiration for other lessons) What kind of account is Treasury Stock ?

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Let's Talk About Treasury Stock

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  1. Let's Talk AboutTreasury Stock an out of class less attempting to make-up for a snow day

  2. Topics Covered (click a link to jump to that part of the presentation) • Exercise (used as inspiration for other lessons) • What kind of account is Treasury Stock? • Adjectives to describe stock: authorized, issued, and outstanding • Treasury Stock illustration from class (someday, I hope) • Completion of the Exercise (selling TS for more, less, and a lot less)

  3. Exercise (Similar to E13-7 from 8th edition) On January 20 the stockholders' equity section of the balance sheet of N Corporation shows the following account balances: Common Stock ($5 par) $1,500,000; paid-in capital in excess of par $1,000,000; and Retained Earnings $1,200,000. During the year, the following transactions occurred: Mar. 1 Purchased 50,000 shares of N Corporation shares for $15 per share. July 1 Sold 10,000 shares of shares acquired on March 1 for $17 per share. Sept. 1 Sold 8,000 of shares acquired on March 1 for $14 per share. Instructions: (a) Journalize these transactions. (b) Restate the entry for September 1, assuming the shares were sold for $12 per share.

  4. Exercise (Similar to E13-7 from 8th edition) On January 20 the stockholders' equity section of the balance sheet of N Corporation shows the following account balances: Common Stock ($5 par) $1,500,000; paid-in capital in excess of par $1,000,000; and Retained Earnings $1,200,000. During the year, the following transactions occurred: Mar. 1 Purchased 50,000 shares of N Corporation shares for $15 per share. July 1 Sold 10,000 shares of shares acquired on March 1 for $17 per share. Sept. 1 Sold 8,000 of shares acquired on March 1 for $14 per share. Instructions: (a) Journalize these transactions. (b) Restate the entry for September 1, assuming the shares were sold for $12 per share.

  5. Journalize the March 1 transaction. May I have a volunteer to make me this entry? Mar. 1 Purchased 50,000 shares of N Corporation shares for $15 per share.

  6. Journalize the March 1 transaction. May I have a volunteer to make me this entry? Mar. 1 Purchased 50,000 shares of N Corporation shares for $15 per share.

  7. Journalize the March 1 transaction. Let make parenthetical notations about how we got the numbers.

  8. Journalize the March 1 transaction. Give me a word / term / phrase to describe this $15.

  9. Journalize the March 1 transaction. Purchase price. That is the amount of cash we spent.

  10. Journalize the March 1 transaction. And what about THIS $15?

  11. Journalize the March 1 transaction. Par? Purchase price? Cost? Some other term?

  12. Journalize the March 1 transaction. Cost. But I thought we ALWAYS kept up with stock at PAR?

  13. Journalize the March 1 transaction. What part of ALWAYS do you not understand?

  14. Journalize the March 1 transaction. The original issue of stock is recorded at par. This is Treasury Stock. ALWAYS record TS at COST.

  15. Journalize the March 1 transaction. Let's talk about Treasury Stock. What kind of account is Treasury Stock?

  16. What kind of account is Treasury Stock? Which one of you would be willing to dialog with me a bit?

  17. What kind of account is Treasury Stock? Michael? Are you willing? Sure!

  18. What kind of account is Treasury Stock? So, Michael? What kind of an account is Treasury Stock?

  19. What kind of account is Treasury Stock? Is it an asset? Liability? Capital? Revenue? Or expense? Capital

  20. What kind of account is Treasury Stock? Yes. Good. And this chapter we've learned the new name for capital is ... Stockholders' Equity

  21. What kind of account is Treasury Stock? Correct. And how many parts of Stockholders' Equity are there? Two.

  22. What kind of account is Treasury Stock? And what are their names? "Paid-in" and "Retained"

  23. What kind of account is Treasury Stock? Precisely! And what is the normal balance of capital / stockholders' equity? Credit.

  24. What kind of account is Treasury Stock? And what is the normal balance of Treasury Stock? ? ? ?

  25. What kind of account is Treasury Stock? (thinks back to earlier when we made the entry to record buying the TS.)

  26. Journalize the March 1 transaction. Michael is thinking back to this entry.

  27. What kind of account is Treasury Stock? Debit?

  28. What kind of account is Treasury Stock? That's a question. Debit.

  29. What kind of account is Treasury Stock? Hhhhuuuuumm. So how shall we explain that? Contra Capital

  30. What kind of account is Treasury Stock? Or using our new terms we could say ... Contra Stockholders' Equity

  31. What kind of account is Treasury Stock? Exactly! Now is it contra paid-in or contra retained?

  32. What kind of account is Treasury Stock? Michael? Huh?

  33. What kind of account is Treasury Stock? Is Treasury Stock contra paid-in or contra retained? Contra Paid-in

  34. What kind of account is Treasury Stock? Jake? Contra Retained

  35. What kind of account is Treasury Stock? Well, those are the two good answers!

  36. What kind of account is Treasury Stock? I'd love to know what each one of you is thinking right now. Really!

  37. What kind of account is Treasury Stock? Each of you should decide now: contra paid-in? or contra retained?

  38. What kind of account is Treasury Stock? Paid-in Retained Paid-in Paid-in Retained Paid-in Paid-in Paid-in

  39. What kind of account is Treasury Stock? The answer is NEITHER! It was a trick question!

  40. What kind of account is Treasury Stock? Let's find out why. Turn to pg 578 in your textbook. Find the SE section in the lower third of the page.

  41. What kind of account is Treasury Stock? Find Treasury Stock. Find total paid-in. Was TS deducted from total paid-in?

  42. What kind of account is Treasury Stock? NO! Then TS is NOT contra paid-in.

  43. What kind of account is Treasury Stock? Find Treasury Stock. Find Retained Earnings. Was TS deducted from RE?

  44. What kind of account is Treasury Stock? NO! Then TS is NOT contra retained.

  45. What kind of account is Treasury Stock? TS is contra Stockholders' Equity. And that's all you can say about it.

  46. What kind of account is Treasury Stock? Most conta accounts are contra a category and contra to something specific. Not so with TS.

  47. What kind of account is Treasury Stock? TS is contra Stockholders' Equity.

  48. Adjectives to Describe Stock We sometimes describe number of shares for a corporation with three different adjectives: Authorized Issued Outstanding Let's consider the meaning of each.

  49. Adjectives to Describe Stock Think of as many synonyms for authorized as you can. "Sorry but you can't park there." Or high school principal catches you in the hallway when you should be in class. Authorized Issued Outstanding

  50. Adjectives to Describe Stock Allowed. Permitted. Permission. Did you think of some good ones too? My favorite is "permission." Authorized Issued Outstanding

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