Question

Llewelyn Company purchased 1,200 shares of its own $5 par value common stock when the market price of the stock was $25 per share. Which of the following journal entries would be used to record the purchase of treasury stock?

Answer 1

The entry to record the purchase of treasury stock will be an increase in treasury stock account and decrease in the cash account by $30000.

market price of the stock=
`\$ 25`

Number of shares= 1200.

∴
`\$25* 1200= \$ 30000`

Treasury stock will be recorded at cost.

Journal entry:

Treasury stock Dr---------------$30000

Cash Cr-----------------$30000

(Purchased treasury stock)