Question

The Vernon Corporation was formed on January 2, 2018. The company sold 20,000 shares of $8.00 par value stock for $20.00 per share. On July 1, 2018, Vernon bought back 4,000 shares of stock for $24.00 per share. The treasury stock was resold on September 1, 2018 for $32.00 per share. Which one of the following is the correct entry to record when Vernon acquires its shares to hold as treasury stock?

A) DR Treasury stock 96,000 CR Cash 96,000B) DR Investments 96,000 CR Cash 96,000C) DR Common stock 96,000 CR Cash 96,000D) DR Retained earnings 96,000 CR Cash 96,000

Answer 1

A option is correct

DR Treasury stock 96000 CR Cash 96000

Step-by-step explanation:

given data

2 jan share = 20000

par value stock = $8

per share = $20

1 july share 4000

per share = $24

1 sep

per share = $32

to find out

which of the statement is correct

solution

we know here price of stock is $24 per share

and here number of share is 4000

so total price will be price of stock × share

total price = 24 × 4000

total price = $96000

so stock will debit @ $96000

and

credit @ $96000

so here A option is correct

DR Treasury stock 96000 CR Cash 96000