Reference no: EM132597979

Question - Doll House Corporation's balance sheet reported the following during 2019:

Capital stock outstanding, 5,000 shares, par $ 30 per share $ 150,000

Paid-in capital in excess of par $ 80,000

Retained earnings $ 100,000

The following transactions occurred this year:

1. Purchased 120 shares of capital stock to be held as treasury stock, paying $ 80 per share.

2. Sold 90 of the shares of treasury stock at $ 75 per share.

3. Sold the remaining shares of treasury stock at $ 85 per share.

Required -

1. Prepare the journal entry for these transactions under the cost method of accounting for treasury stock.

2- Explain the reasons for which a corporation might purchase its own stock, mention your reference in Harvard format.