Treasury Stock, Cost Method (and IFRS Revaluation)
Response to the following problem:
The records of TMP Incorporated provide the following information on January 1, 2010:
Preferred stock $50 par (5,000 shares authorized, issued, and outstanding) $250,000
Common stock $10 par (20,000 shares authorized, 10,000 shares issued and outstanding) 100,000
Additional paid-in capital on preferred stock 50,000
Additional paid-in capital on common stock 80,000
Retained earnings 95,000
During 2010, the following transactions were recorded by TMP:
1. Reacquired 250 shares of preferred stock for $53 per share.
2. Reacquired 500 shares of common stock for $20 per share.
3. Sold 200 shares of the common stock acquired in (2) for $27 per share.
4. Sold 250 shares of preferred stock acquired in (1) for $59 per share.
5. Sold 100 shares of the common stock acquired in (2) for $18 per share.
Required
1. Prepare journal entries to record the stock transactions of TMP Incorporated, assuming it uses the cost method of accounting for treasury stock.
2. Prepare the stockholders' equity section of the TMP balance sheet at December 31, 2010 (assume 2010 net income was $30,000 and dividends distributed were $10,000)
3. Assume that TMP is using IFRS. At the end of 2010, TMP revalued its property, plant, and equipment upward by $40,000. Discuss how TMP's stockholders' equity items would be different under IFRS, and then, based on your answer, repeat Requirement 2.