At January 1, the records of Frazer Corporation showed the following.
Common stock, $10 par, 60,000 shares outstanding
Paid-in capital in excess of par.
Retained earnings
During the year, the following transactions affecting shareholders' equity occurred.
$600,000
240,000
160,000
On January 15, purchased 1,000 shares of common stock for the treasury at $20 per share.
On March 1, purchased 1,000 shares of common stock for the treasury at $22 per share.
On June 30, sold 1,200 shares of treasury stock at $25.
State law places a restriction on retained earnings where it must be equal to or greater than the cost of treasury
stock held. Net income for the year was $45,000.
Required
a. Provide entries for each of the three transactions. Assume a FIFO flow for treasury stock.
b. Provide the entry to close net income to retained earnings.
c. Determine the ending balance for each capital account, including common stock, paid-in capital in excess
of par, retained earnings, and treasury stock.
d. Prepare the required disclosure note, if any, related to the treasury stock.
e. Provide the journal entry on January 15 assuming instead that the company purchased and immediately re-
tired the 1,000 shares of common stock at $20 per share.
f. Repeat part a but instead assume a weighted average flow for treasury stock.
