Question

Prior to September 30, a company has never had any treasury stock transactions. A company repurchased 1,000 shares of its $2 par common stock on September 30 for $20 per share. On October 2, it reissued 400 of these shares at $21 per share. On October 12, it reissued the remaining 600 shares at $19 per share. The journal entry to record the reissuance of the shares on October 12 would be
a. Debit Cash, $11,400; Credit Treasury Stock, $800; Credit Paid-in Capital, Treasury Stock, $10,600.
b. Debit Cash, $11,400; Debit Paid-in Capital, Treasury Stock, $400; Debit Retained Earnings, $200; Credit Treasury Stock, $12,000.
c. Debit Cash, $11,400; Debit Paid-in Capital in Excess of Par Value, Common Stock, $400; Debit Retained Earnings, $200; Credit Treasury Stock, $12,000.
d. Debit Cash, $11,400; Debit Paid-in Capital, Treasury Stock, $600; Credit Treasury Stock, $12,000
e. Debit Cash, $11,400; Debit Paid-in Capital in Excess of Par Value, Common Stock, $600; Credit Treasury Stock, $12,000

Answer 1

Answer:

Option (B)

Explanation:

According to the scenario, computation of the given data are as follow:-

Journal Entry

30 Sept. Treasury stock A/c Dr. $20,000

               (1,000 × $20)              

               To Cash A/c $20,000  

2 Oct. Cash A/c Dr.  $8,400

                ($21 × 400)    

               To Treasury stock A/c ($20 × 400)  $8,000    

               To Additional paid in capital-treasury stock A/c $400    

                             ($8,400-$8000)

12 Oct. Cash A/c Dr. $11,400

                 ($19 × 600)

               Additional paid in capital-treasury stock A/c Dr $ 400

               Retained earnings (plug) A/c  Dr. 200  

                To Treasury stock A/c  $12,000

                    ($20 × 600)

According to the analysis, option (b) is correct.