Question

When a corporation buys back shares of its own common stock in a market transaction for a price greater than par value, the corporation will:

a. Debit Treasury Stock and credit Cash.
b. Debit Retained Earnings and credit Treasury Stock.
c. Debit Treasury Stock and credit Common Stock.
d. Debit Common Stock and credit Treasury Stock.

Answer 1

When a corporation buys back shares of its own common stock in a market transaction for a price greater than par value, it will debit Treasury Stock and credit Cash.

Step-by-step explanation:

When a corporation buys back shares of its own common stock in a market transaction for a price greater than par value, the corporation will:

• a. Debit Treasury Stock and credit Cash.

When a corporation buys back its own shares, it records the transaction by debiting the account called Treasury Stock to represent the shares it bought back. The corporation also credits the Cash account to reflect the outgoing cash flow.