On October 10, the stockholder's equity of Sherman Systems appears as follows:
Common stock $ 10 par value, 72,000 shares authorized, issued, and outstanding . . . . . . . . . . . . . . . . . . $ 720,000
Paid in capital in excess of par value, common stock . . . . 216,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 864,000
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,800,000
1. Prepare journal entries to record the following transactions for Sherman Systems.
a. Purchased 5,000 shares of its own common stock at $ 25 per share on October 11.
b. Sold 1,000 treasury shares on November 1 for $ 31 cash per share.
c. Sold all remaining treasury shares on November 25 for $ 20 cash per share.
2. Explain how the company's equity section changes after the October 11 treasury stock purchase, and prepare the revised equity section of its balance sheet at that date.