Final answer:
To record the acquisition of treasury stock, B. Doran Company would debit Treasury Stock and credit Cash for the total cost of the reacquired shares, which equals the number of shares times the price per share.
Step-by-step explanation:
The student is asking about how to record the acquisition of treasury stock using the cost method on the financial records of a company. When B. Doran Company reacquired 4,000 shares of its $15 par value common stock for $18 per share, the journal entry to record this transaction would involve a debit to Treasury Stock and a credit to Cash. The value of the debit and credit would be the cost of the reacquired shares, which is the number of shares multiplied by the reacquisition price per share.
To record the acquisition of treasury stock, B. Doran Company should make the following journal entryDebit Treasury Stock for the cost of the shares reacquired, which is $18 per share multiplied by 4,000 shares, resulting in a debit of $72,000Credit Cash for the same amount, $72,000, representing the outflow of cash to acquire the shares.The journal entry would look like this:This entry reduces the cash account and adds the treasury stock at cost in the company's balance sheet. The par value is not considered in this entry under the cost method.