Answer:
D. A credit to Share Premium—Treasury P2,000
Explanation:
Stock Repurchase is a method to reduce the outstanding shares and equity value of the company in the market, company pays the stockholder and purchases own shares, which can be reissued or cancelled later on.
Common stock value = 2,500 shares x P2 per share = P5,000
Additional Paid-in-Capital = 2,500 million shares x ( P12- P2 )per share = P25,000
January 1, 2012
Repurchase Value = 1,000 x P24 = P24,000
Stock was repurchased and recorded as follow
Dr. Treasury Shares P24,000
Cr. Cash P24,000
September 30, 2012
Shares are reissued at this date
Cash received = 500 x P28 = P1,4000
Cost of reissued shares = 500 x P24 = P12,000
Difference between the re-issuance value and cost of reissued shares will be added to the Add-in-capital from treasury stock account.
Journal Entry for Re-issuance
Dr. Cash $14,000
Cr. Share Premium treasury stock $2,000
Cr. Treasury stock $12,000
