 Cash is affected. We sold our treasury stock for cash and therefore cash has a debit balance We're gonna make it go up by doing the same thing to it which in this case would be another debit So I'm gonna copy the cash right-click and copy the cash We're gonna put that on top in H11 right-click and paste 1 2 3 and The cash that we're gonna that we will be receiving is this 45,000. We could do the calculation one more time I'll do the calculation here, and it's gonna be equal to the 15 100 shares times $30. We sell it for meaning we get the 45,000 So then what's gonna? What's gonna be the credit? Well, what are we selling? We're selling treasury stock and Note again, it looks like any other kind of stock in that. It's a debit balance account I mean if it wasn't any other type of stock, it would also be a debit balance But unlike if we bought stock in another company, it would be up here a debit balance account in the asset section Down here. It's a debit balance account in the contra Equity section. It's a contra equity account because it's really our own Stocks so it has a debit in it We need to make it go down by the portion that we sold therefore We're gonna do the opposite thing to it which in this case is a credit So I'm gonna copy that we're gonna put that down here and right-click and paste it one two three And then we're gonna post the amount and once again the amounts gonna be this 37.5 but we can do the calculation one more time the calculation I'm gonna put a negative to make it a negative number and it's gonna be the one five shares that we sold times the cost which remember was 25 so times 25 and It's going off the books for that 37.5 then of course our debits do not equal our credits if we highlight those we can see that in the taskbar We're off by 7,000 five. We need a credit to even this out I'm gonna do that with what I call the plug formula or plug formula, which is a negative and then some So I'm gonna negative some so I'm gonna sum these up and then the negative instead of an equal sign will Flip the signs that's gonna make it it would have been a positive 75 flip the sign to a negative 75 Therefore the two credits now add up to the debits if we add up the positive number of debits minus the negative number of credits adds up to zero and Where are we gonna post this amount then that's kind of the problem in this case now where does that go? We need to even this thing out and we are going to have in this case an account called Paid in capital treasury stock, so that's what we're gonna post this out. I'm gonna copy this And I'm gonna paste that one two three right here. Alright, so now let's post this out So we got the cash first. We're gonna post the cash cash is here. It's gonna be here on the trial balance We're gonna post it to the middle section in in seven something's in it Therefore we're gonna double click on it and go to the end of it and say plus then point to this 45,000 This is a debit. That's a debit. Those are the same therefore It's gonna go up in the debit direction then we can post the treasury stock. So here's the treasury stock Here's the treasury stock members in the equity section. We're gonna double click on the middle in 12 so because something's in it double clicking go to the end of it and plus and click on the 37 5 that's a credit. This is a debit and that means their offsets and it's gonna go down Then we're gonna take the paid in capital here. Here's the paid in capital here We're gonna go to the posting column in in 13 And we're gonna say this equals and then point to this 7 5 and that's gonna make this go up in The credit direction. So as long as we still have a treasury stock on the books We could have this paid in capital if we pay off all the treasury stock then we're gonna have to reduce that paid in capital to Zero because that paid in capital account is of course related to the treasury stock. All right Let's go back over here and see the next transaction. We have the next transaction being on 822 sold treasury stock. So we sold more of the treasury stock on 822. I'm gonna put that over here 8 22 we sold the amount of 3,005 shares and at $20 this time So we saw I sold it at $20 which we can see now is gonna be a loss because we bought it for 25 Remember, so we're gonna have a loss on it. Let's calculate that loss. So now we sold 3 5 down here in this worksheet and we sold it for a Sales price in this case of 20 Therefore, we're gonna say this equals the number of shares three five times 20. We're gonna receive cash of 70,000 then let's calculate the cost side of it those same three five shares that we are now selling cost us $25 remember that was up here this 25 up here that's one and Therefore, we're gonna say this equals the three that three thousand five shares times 25 and that means that they cost us 875 so now we have a loss. Let's calculate what that loss would be. It would be the 70,000 minus the 87 five We have a loss of 17 five note. We can also calculate that loss by saying let's take this three five shares multiply it times the difference of the cost 20 minus the sales price 25 meaning we're losing five dollars per share and if we did that calculation then We should come up with the same number three five. Oh times Five and we get that seven seventeen five. So that's another way we calculate that same 17 five, so let's post that out and think about that in terms of a journal entry So first question is cash affected. Yeah, we sold we sold it for cash We sold our own treasury stock for cash Cash has a debit balance therefore and we need to make it go up Therefore, we're gonna do the same thing to it which in this case would be another debit So we're gonna copy that and put that on top in h 15 right click and paste it one two three So the amount that we are going to receive remember is this seventy thousand. I'm gonna calculate it one more time We're gonna say it equals the three thousand five shares We're gonna sell times the amount we're receiving per share of twenty dollars. So there we have it. What do we sell him? Treasury stock once again, it's an it's a debit balance account Which is would be very similar to if we sold other kinds of stock However, it's down here in the equity section rather than in the asset section because it is our own stock Contra equity account. It has 87 five in it and notice we're gonna have to take the entire amount out of it because we sold all of the treasury stock So so we know the credit is going to be 87 five But we can also calculate it and it will come up with the same 87 five over here. So in any case we know that this is a Debit we need to make it go down to zero therefore. We're gonna do the opposite thing to it Which will be a credit so I'm gonna copy this in elf 12 right click and copy We're gonna post that in H 16 right click and paste one two three and once again I'm gonna do the calculation for us. We did it here. Let's do it one more time Gonna say this is a negative of 3,005 shares times $25 which is the cost per chair means we come up with that 87 five Remember we're selling all the ones that we had now because we had 5,000 on the books We sold 15 now. We're selling the other three five Meaning we have no longer any treasury stock. So this will take the treasury stocks completely off the books Now the tricky thing here is that if we take the treasury stocks completely off the books We have to clean out the paid in capital because it wouldn't make sense for us to have a paid in capital account Related to treasury stock if there's no treasury stock. So When we completely eliminate the treasury stock, we need to also take the paid in capital off the books Now you might be saying if I highlight these two I say the 70 and the 87 five We have a difference of 17 five and the treasury stock only has 7,005 in it. So We can't we're gonna have to do something other than that We're gonna have to take this to zero and then we'll still have a plug that we're gonna have to put somewhere and That will go to the retained earnings. So let me show you what that'll look like We need we know we need this to go to zero and that is a credit balance. We need to make it go to zero We're gonna do the opposite thing to it, which in this case would be a debit So I'm gonna copy this and in L 13 right-click copy put this in H 17 right-click paste it one two three We need to take it completely off the books for what it's on the books at which is seven five So we'll debit it seven five then We have a problem here because the debits don't equal the credits. It's off by ten thousand So the debits are at seventy seven five the credits are at eighty seven five We need another ten thousand on the debit side So I'm gonna do our negative sum function in order to calculate that ten thousand again equals negative sum and then highlight these and that'll give us the ten and flip the sign and Then if we highlight the debits it adds up to eighty seven five and if we highlight all of it It adds up to zero now The only question is where are we gonna put that and once again that plug is basically just gonna go to Retain earnings. We're gonna put that into retained earnings So I'm gonna copy retained earnings and I put that in H 18 right-click and paste it one two three All right, so let's post this out. We got the cash at 70. Here's the cash. Here's cash on the trial balance We're gonna post it to the middle column. So we are in in seven I'm gonna double-click on that go to the end of it Plus and then click on the seventy thousand and enter Then we're gonna go to the treasury stock. So treasury stock is here. It is here on the trial balance This is where we want to post it gonna double-click on that go to the end of it and plus and point to this 87 five should take treasury stock down to Zero so we took treasury soft off the books. We have now sold all the shares Then we're gonna post the paid in capital. Here's the paid in capital here It is on the trial balance. This is where we want to post it something's in it So we're gonna double-click on it go to the end of it and plus and then point to that seven five That should bring this balance down once again to Zero and then we need to plug this last retained earnings amount to this in 14 retained earnings on trial balance double-clicking on it go to the end of it and plus Point to the ten thousand and enter All right, so there's that one We have one more transaction and we have to stop this and that's going to be on 94 which says that we declared a dividend Per stockholder of a $2. So we had that we have another $2 dividend that we are now declaring and What's gonna happen when we declare the dividend if we think through it? We're gonna say is cash affected and in this case. No, it's not effective because we declared it We have not yet paid it Therefore what we have is an obligation as of the date we declared the dividend we are obligated to pay it therefore, we have a dividend payable account and It is a liability account the amount needs to go up because we owe more money Liability accounts have credit balances in order to make it go up We're gonna do the same thing to it which in this case is another credit I'm gonna copy the payable gonna put that on the bottom so that we can credit it right click and paste one two three So the amount that we're gonna pay now and the question is You know, how many shares are outstanding once again? And we know we can see that we have the common stock of 500,000 par value of 10 So 500,000 divided by tens means there's 50,000 shares and there are no treasury stocks Outstanding at this time because this 5000 that we purchased we sold back Here which we can see on the books here because there's no money in the treasury stock Therefore, we have 50,000 shares outstanding. So it's gonna be a fairly simple calculation We're just gonna take I'm gonna flip the sign by making a negative 50,000 shares times two is that 100,000 now we're gonna debit something for the same 100,000 and what are we gonna debit? We are going to debit retained earnings So remember what debit dividends is it's similar to like a draw for a sole proprietor We are giving the money that has been earned by the company to the owners being in this case stockholders Retained earnings represents the accumulation of that revenue over the life of the company that has not yet been distributed It has a credit balance in it We're gonna make it go down by doing the opposite thing to it and thereby distribute that value to the owners being Stockholders, so I'm gonna copy the retained earnings and paste that in each 20 right click paste it one two three Now the thing to note here is that this this we declared the same $2 dividend But of course here we paid the 100 rather than the 90 when we declared a $2 dividend up here on January 2nd The difference being is that when we click declared this dividend up here We had outstanding treasury stock and when we declared this dividend down here We don't have any outstanding treasury stock as we sold it back. All right, so let's post this out So we're gonna post the retained earnings. Here it is on the trial balance Here's where we want to post it in in 14 We're gonna double-click on that go to the end of it and plus and then point to this 100,000 in retained earnings and enter retained earnings goes down. We are out of balance We're gonna post the common stock payable here and here's the common stock payable. We're gonna double-click on in 9 double-click go to the end of it and plus and point to this 100,000 credits bringing the credit balance up in the credit direction to 100,000 and putting us back in balance down here