Journalizing treasury stock transactions and reporting stockholders’ equitySouthern Amusements Corporation had the following stockholders’ equity on November 30:On December 30, Southern purchased 200 shares of treasury stock at $15 per share. RequirementsJournalize the purchase of the treasury stock. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018. Assume the balance in retained earnings is unchanged from November 30.How many shares of common stock are outstanding after the purchase of treasury stock?

Dr Treasury stock 3,000

Cr Cash 3,000

Total Stockholders’ equity $52,000

50 shares

Explanation:

Preparation of the Journal entry for the purchase of the treasury stock.

Dr Treasury stock 3,000

(200 shares ×$15 )

Cr Cash 3,000

Preparation of the stockholders’ equity section of the balance sheet at December 31, 2018

Stockholders’ equity

Paid in capital

Common stock $1,250

($5×250 shares)

Paid in capital in excess of part $3,750

Total paid in capital $5,000

(3,750+1,250)

Retained earnings $50,000

Treasury stock ($3,000)

Total Stockholders’ equity $52,000

Calculation for shares of common stock that are outstanding after the purchase of treasury stocks

Outstanding common stock=$250 shares-$200 shares

Outstanding common stock=50 shares

Therefore 50 shares of common stock are outstanding after the purchase of treasury stocks