Question

On January 1, Vermont Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares has been issued in a prior period at $20.00 per share. On February 1, Vermont purchased 3,750 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1. ​ The journal entry to record the purchase of the treasury shares on February 1 would include a a. ​debit to a loss account for $112,500 b. ​debit to Treasury Stock for $90,000 c. ​credit to a gain account for $112,500 d. ​credit to Treasury Stock for $90,000

Answer 1

b. ​debit to Treasury Stock for $90,000

Step-by-step explanation:

We multiply the shares purchased by their cost:

3,750 shares x $24 each = 90,000

The cash account will decrease by 90,000 therefore in the credit side to represent the amount iused to acquire these shares.

In the debit side we post the treasury stock account to represent the decrease in the outstanding common shares.

Answer 2

b. ​debit to Treasury Stock for $90,000

Step-by-step explanation:

Vermont Corporation

​Debit to Treasury Stock for $90,000

($3,750 shares of treasury stock × $24 per share)

Therefore the journal entry to record the purchase of the treasury shares on February 1 would include​ Debit to Treasury Stock for $90,000 because On February 1, Vermont purchased 3,750 shares of treasury stock for $24 per share.