Question

Prior to September 30, a company has never had any treasury stock transactions. A company repurchased 1,000 shares of its $2 par common stock on September 30 for $20 per share. On October 2, it reissued 400 of these shares at $21 per share. On October 12, it reissued the remaining 600 shares at $19 per share. The journal entry to record the reissuance of the shares on October 12 would be

a. Debit Cash, $11,400; Credit Treasury Stock, $800; Credit Paid-in Capital, Treasury Stock, $10,600.
b. Debit Cash, $11,400; Debit Paid-in Capital, Treasury Stock, $400; Debit Retained Earnings, $200; Credit Treasury Stock, $12,000.
c. Debit Cash, $11,400; Debit Paid-in Capital in Excess of Par Value, Common Stock, $400; Debit Retained Earnings, $200; Credit Treasury Stock, $12,000.
d. Debit Cash, $11,400; Debit Paid-in Capital, Treasury Stock, $600; Credit Treasury Stock, $12,000
e. Debit Cash, $11,400; Debit Paid-in Capital in Excess of Par Value, Common Stock, $600; Credit Treasury Stock, $12,000

Answer 1

Option (B)

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Journal Entry

30 Sept. Treasury stock A/c Dr. $20,000

(1,000 × $20)

To Cash A/c $20,000

2 Oct. Cash A/c Dr. $8,400

($21 × 400)

To Treasury stock A/c ($20 × 400) $8,000

To Additional paid in capital-treasury stock A/c $400

($8,400-$8000)

12 Oct. Cash A/c Dr. $11,400

($19 × 600)

Additional paid in capital-treasury stock A/c Dr $ 400

Retained earnings (plug) A/c Dr. 200

To Treasury stock A/c $12,000

($20 × 600)

According to the analysis, option (b) is correct.