Question

In 2014, Hobbs Corp. acquired 12,000 shares of its own $1 par value common stock at $18 per share. In 2015, Hobbs issued 8,000 of these shares at $25 per share. Hobbs uses the cost method to account for its treasury stock transactions. What accounts and what amounts should Hobbs credit in 2015 to record the issuance of the 8,000 shares?

Answer 1

It will credit:

Treasury Stock for 144,000

Additional Paid-in TS for 56,000

Step-by-step explanation:

for the purchase Hobbs did:

treasury stock 216,000

cash 216,000

the entry for the issuance of 8,000 shares will be:

cash proceeds debit: 8,000 x 25 = 200,000

treasury stock at cost: 8,000 18 = 144,000 credit

additional paid-in treasury stock for the difference 200,000 - 144,000 = 56,000

the entry will be:

cash 200,000 debit

Treasury Stock 144,000 credit

Sdditional Paid-in TS 56,000 credit