Question

In January, Stripe, Inc. purchased 50 shares of its own $10 par value common stock for $20 per share. In March, Stripe sold 10 shares at $25 per share. The journal entry to record the sale of treasury stock using the cost method would include a (debit/credit) Blank 1 of 2 to Treasury Stock in the amount of $ Blank 2 of 2.

Answer 1

Answer: credit; $200

Explanation:

The journal entry to record the sale of treasury stock using the cost method would include a credit to Treasury Stock in the amount of $200.

Using the cost method, the journal entry should reflect the sale of the stock at the original price it was purchased at ( its cost). With the original cost of purchase being $20, the 10 shares that were sold will be recorded as;

= 10 shares * $20

= $200

This will be credited to the Treasury account and along with the additional amount made on the sale, debited to the cash account to reflect a cash increase.