Question

On September 1, 2012, Valdez Company reacquired 16,000 shares of its $10 par value common stock for $15 per share. Valdez uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit

a. Treasury Stock for $160,000.
b. Common Stock for $160,000.
c. Common Stock for $160,000 and Paid-in Capital in Excess of Par for $60,000.
d. Treasury Stock for $240,000

Answer 1

d. Treasury Stock for $240,000

Step-by-step explanation:

The journal entry for re-acquisition of the stock under the cost method is shown below:

Treasury stock A/c Dr $240,000

To Cash A/c $240,000

(Being the stock are reacquired for cash)

The $240,000 amount should be come from

= Number of shares × common stock per share

= 16,000 shares × $15

= $240,000

Since the stock is reacquired so we used the treasury stock account instead of the common stock account