Question

California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $23 per share. Later in the year, the company decides to purchase 100 shares at a cost of $26 per share.

Required:
Record the transaction if California Surf resells the 100 shares of treasury stock at $28 per share.

Answer 1

Treasury stock = Number of shares repurchased × Cost of repurchased share

=100 Shares×$26

=$2,600

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Additional paid-in-capital= Number of shares repurchased × (Reissue price - Cost)

=100 Shares × ($28−$26)

=$200

Hence, the treasury stock and additional paid in capital to be recorded in the journal entry will be $2,600 and $300 respectively.

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Date Account Title Debit Credit

Cash (100 shares * $28) $2,800

Treasury stock (100 shares * $26) $2,600

Additional paid in capital ( 100 shares * $2) $200

(To record the reissue of treasury stock shares)