Question

When treasury stock is reissued for more than cost,

A. debit Cash and credit Treasury Stock.
B. debit Cash and credit Treasury Stock and Paid-In Capital from Treasury Stock.
C. debit Cash and credit Common Stock and Paid-In Capital from Common Stock.
D. debit Cash and credit Treasury Stock and Retained Earnings.

Answer 1

The correct answer is B. Debit cash and credit Treasury stock and paid in capital from Treasury stock.

If the treasury stock is being reused for more than what it was supposed to be in the acquisition cost the amount of cash which is in excess is being credited from Treasury Stock from Paid-in capital.

If it is reused for less amount then what we got out of the deductions is being debited from previous transactions of treasury stock to the account of paid-in capital.

If the balance which has remained in the previous stock is insufficient then the difference goes to be charged to the retained earnings.