Question
Vanguard Corp accounts for treasury stock using the cost method.
| Date | Event |
|---|
| March 3 | Purchased 2,000 shares of its own common stock for $15 per share. |
| July 20 | Reissued 1,200 of the treasury shares for $18 per share. |
Required: Prepare the journal entries for the purchase and the reissue. On reissue above cost, credit the excess to Paid-in Capital from Treasury Stock.
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 1 and IAS 32 — presentation of equity
Equity is presented as its components — share capital, share premium, reserves and retained earnings — and each transaction affects a specific one. Identify the component before the amount, since the totals often agree even when the split is wrong.
Common mistakes
- Merging share premium into share capital.
- Taking a transaction with owners through profit or loss instead of directly to equity.
- Presenting treasury shares as an asset rather than as a deduction from equity.
Further readingPreparing a balance sheet step by step