TREASURY SHARES

• Corporation’s own shares

• Issued and fully paid
• Reacquired (by purchase, redemption,
donation, or through other lawful means) not
for the purpose of cancellation
TREASURY SHARES
1. Acquisition
Rule: Treasury shares should be
recorded at cost.
How much is cost?
Cash = cash payment
Non-cash = recorded amount of
the noncash assets surrendered
or given in exchange
 ACQUISITION
Treasury Shares xxx
Cash xxx

Accu. Profits & Losses xxx

Acc. Profits & Losses App. for TS xxx
**Based on the Trust Fund Doctrine, Legal
Capital concept. No portion of the legal capital
will be return to its owners during the lifetime of
the corporation.
 ACQUISITION
Treasury Shares xxx
Merchandise Inventory xxx
OR
Treasury Shares xxx
Accu. Depreciation xxx
Equipment xxx

Accu. Profits & Losses xxx

Acc. Profits & Losses App. for TS xxx
 REISSUANCE
Rule: Compare cost and issue price.
a. At Cost ( Issue Price = Cost)
Cash xxx
Treasury Shares xxx

Acc. Profits & Losses Appropriated for TS xxx

Accu. Profits & Losses xxx
 REISSUANCE
b. Above Cost ( Issue Price > Cost)
Cash (@issue price) xxx
Treasury Shares (@cost) xxx
Share Premium – TS xxx

Acc. Profits & Losses App. for TS xxx

Accu. Profits & Losses xxx
 REISSUANCE
c. Below Cost ( Issue Price < Cost)
Cash (@issue price) xxx
Share Premium – TS xxx*
Acc. Profits & Losses xxx*
Treasury Shares (@cost) xxx
* In the order of priority!

Accu. Profits & Losses App. for TS xxx

Accu. Profits & Losses xxx
How much can the Share Premium account
absorb?
1. Premium per share x # of shares retired

2. # of shares retired
-------------------------- x Total Share Premium
# of shares issued
Any questions or
clarifications???
XYZ Incorporated had the following balances in its Stockholders’ Equity
before the treasury stock transactions occurred.

Ordinary Shares, P1,000 par, 10,000 shares authorized,

8,000 shares issued and outstanding P8,000,000
Share Premium 160,000
Accu. Profits & Losses 3,000,000
P11,160,000

During the year, the following transactions occurred:

1. XYZ reacquired 500 of its shares for P1,100 per share.
2. Sold 100 of the treasury shares for P1,000 per share.
3. Sold 200 of the treasury shares for P1,250 per share.
4. Sold 150 of the treasury shares for P1,050 per share.
5. Retired the remaining shares.
Required:
Prepare the journal entries for transactions 1 to 5.
1. XYZ reacquired 500 of its shares for P1,100 per share.

Treasury Shares ( 500 shs. x P1,100) 550,000

Cash 550,000

Accu. Profits & Losses 550,000

Accu. Profits & Losses App. For Treasury Shares 550,000
2. Sold 100 of the treasury shares for P1,000 per share.

Cash( 100 shs. x P1,000) 100,000

Accu. Profits & Losses 10,000
Treasury Shares (100 shs. x P1,100) 110,000

Accu. Profits & Losses App. For Treasury Shares 110,000

Accu. Profits & Losses 110,000
3. Sold 200 of the treasury shares for P1,250 per share

Cash ( 200 shs. x P1,250) 250,000

Treasury Shares (200 shs. x P1,100) 220,000
Share Premium –TS 30,000

Accu. Profits & Losses App. For Treasury Shares 220,000

Accu. Profits & Losses 220,000
4. Sold 150 of the treasury shares for P1,050 per share.

Cash ( 150 shs. x P1,050) 157,500

Share Premium-TS 7,500
Treasury Shares (150 shs. x P1,100) 165,000

Accu. Profits & Losses App. For Treasury Shares 165,000

Accu. Profits & Losses res 165,000
5. Sold the remaining shares.at P900 per share.

Cash ( 50 shs. x P900) 45,000

Share Premium-TS 10,000
Treasury Shares (50 shs. x P1,100) 55,000

Accu. Profits & Losses App. For Treasury Shares 55,000

Accu. Profits & Losses 55,000
5. Retired the remaining shares.

Ordinary Shares ( 50 shs. x P1,000) 50,000

Share Premium (50 shs./8,000 shs. x P160,000) 1,000
Share Premium-TS 4,000
Treasury Shares (50 shs. x P1,100) 55,000

Accu. Profits & Losses App. For Treasury Shares 55,000

Accu. Profits & Losses 55,000
5. Retired the remaining shares.

Ordinary Shares ( 50 shs. x P1,000) 50,000

Share Premium (50 shs./8,000 shs. x P160,000) 1,000
Share Premium-TS 4,000
Treasury Shares (50 shs. x P1,100) 55,000

Accu. Profits & Losses App. For Treasury Shares 55,000

Accu. Profits & Losses 55,000
XYZ Incorporated had the following balances in its Stockholders’
Equity before the treasury stock transactions occurred.

Ordinary Shares, P100 par, 100,000 shares authorized,

45,000 shares issued and outstanding P8,000,000
Share Premium 3,600,000

During the year, the following transactions occurred:

1. XYZ reacquired 1,000 of its shares for P195 per share.
2. Sold 600 of the treasury shares for P210 per share.
3. Sold 200 of the treasury shares for P190 per share.
4. Retired the remaining shares.
Required:
Prepare the journal entries for transactions 1 to 4.
Treasury Shares ( 1,000 shs. x P195) 195,000
Cash 195,000

Accu. Profits & Losses 195,000

Accu. Profits & Losses App. For Treasury Shares 195,000
Cash( 600 shs. x P210) 126,000
Treasury Shares (600 shs. x P195) 117,000 Share Premium
– TS 9,000
Accu. Profits & Losses App. For Treasury Shares 117,000
Accu. Profits & Losses 1117,000
3

Cash ( 200 shs. x P190) 38,000

Share Premium –TS 1,000
Treasury Shares (200 shs. x P195) 39,000

Accu. Profits & Losses App. For Treasury Shares 39,000

Accu. Profits & Losses 39,000
Ordianary Shares ( 200 shs. x P100) 20,,000
Share Premium** 16,000
Share Premium-TS 3,000
Treasury Shares (200 shs. x P195) 39,000

** 200/45,000 x P3,600,000 =P16,000

Accu. Profits & Losses App. For Treasury Shares 39,000

Accu. Profits & Losses 39,000
Well, goodluck
for your quiz
next meeting!!!!

Thank you for

listening…