Question

Fill in the blank:

XYZ, Inc. purchased 10 shares of its own $5 par value common stock for $20 per share. The journal entry to record this transaction would include a (debit/credit) to the treasury stock account in the amount of $____.

Answer 1

XYZ, Inc. would make a journal entry with a debit to the treasury stock account for $200, reflecting the purchase of 10 shares at $20 each.

Step-by-step explanation:

The purchase of treasury stock by XYZ, Inc:

The journal entry to record the purchase of treasury stock by XYZ, Inc. would include a debit to the treasury stock account. Since the company purchased 10 shares at $20 per share, the total amount would be $200. The entry would therefore record a debit to the Treasury Stock account for $200.

When a company purchases its own stock, it is considered treasury stock. The treasury stock account is a contra equity account that is debited with the cost of the stock purchased. The journal entry to record the transaction would be: Treasury Stock Debit: $200 Cash Credit: $200