Question

On September 14, 2012, Battle Company required 24,000 shares of its 1 par value common stock for20 per share. Battle uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit ________.

1) Treasury stock for $480,000
2) Common Stock for $480,000
3) Common stock for $24,000 and Paid-in Capital in Excess of Par for $46,000
4) Treasury stock for $24,000

Answer 1

In the cost method of accounting for treasury stock, Battle Company's journal entry should debit Treasury stock for $480,000, calculated by multiplying 24,000 shares by the $20 purchase price.

Step-by-step explanation:

The journal entry to record the reacquisition of the stock for Battle Company using the cost method, where 24,000 shares were required at $20 per share, should debit Treasury stock for $480,000.

When using the cost method, the treasury stock is debited for the total purchase cost, not the par value or any amount paid in excess of the par value of the stock.

The calculation for this is 24,000 shares multiplied by the $20 purchase price, resulting in $480,000.

The correct journal entry to record the reacquisition of the stock is option 4) Treasury stock for $24,000.

When a company reacquires its own stock, it is recorded as a reduction in shareholders' equity. The treasury stock account is used to record the cost of the stock that the company repurchases.

In this case, Battle Company reacquired 24,000 shares of its common stock for $20 per share, which amounts to a total of $480,000. So, the journal entry to record the reacquisition of the stock would be a debit to the Treasury stock account for $24,000.