Subara Corporation purchases 1,000 shares of its own $10 par value stock for $15 per share....
Subara Corporation purchases 1,000 shares of its own $10 par value stock for $15 per share. The transaction is recorded using the cost method
15. Proper recording of this transaction will
A) result in a decrease in stockholders’ equity
B) result in a decrease in net income
C) result in an increase in investments
D) include a debit to an Additional Paid-In Capital for $5,000
16. Assume that Subara reissued the stock for $14 per share. Which of the following statements is true?
A) Common Stock will be credited for $5,000
B) Treasury Stock will be credited for $15,000
C) Net income will be reduced by a loss on treasury stock of $1,000
D) An Additional Paid-In Capital account will be credited for $2,000
please explain and show the journal entry. thank you.
Homework Answers
| Journal entries | ||||||||
| TR | Account titles & Explanations | Debit | Credit | |||||
| 1) | Treasury stock | 15,000 | ||||||
| Cash | (1000*15) | 15,000 | ||||||
| 2) | Cash | (1000*14) | 14,000 | |||||
| Retained earnings | 1,000 | |||||||
| Treasury stock | 15,000 | |||||||
| Answers) | ||||||||
| 15) | option A | |||||||
| Result in a decrease in stockholder's Equity | ||||||||
| 16) | option B | |||||||
| Treasury stock will be credited for $15,000 | ||||||||
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