Purpose: (L.O. 3) This exercise will illustrate the use of the cost method of accounting for treasury stock transactions under a variety of price relationships.
Cheers Corporation reported the following stockholders' equity items at December 31, 2013. Each share of stock was issued in a prior year for $12 each.
During 2014, Cheers had the following treasury stock transactions:
Prepare the journal entries for the treasury stock transactions listed above. Apply a FIFO (first-in, first-out) approach in determining the cost of treasury shares sold.