Question

Question 5

1. Table 10-6
   Plating General acquired 3,000 of its own shares at $25 per share. The shares are to be held in Treasury. The par value of Plating General's common stock is $2.50 per share.
   
   
   Referring to Table 10-6, if Plating General were to resell all its treasury stock at $28 per share, what journal entry would Plating General make?

   		Cash 84,000 Additional Paid-in Capital 67,500 Treasury Stock 7,500 Gain on Sale of Treasury Stock 9,000
   		Cash 84,000 Treasury Stock 75,000 Gain on Sale of Treasury Stock 9,000
   		Cash 84,000 Additional Paid-in Capital 76,500 Treasury Stock 7,500
   		Cash 84,000 Additional Paid-in Capital 9,000 Treasury Stock 75,000
   		Cash 84,000 Common Stock 7,500 Treasury Stock 75,000 Gain on Sale of Treasury Stock 1,500

Answer 1

The journal entry for reissue for treasury shares are as follows:

Cash a/c Dr (3000* 28)	84000
To Treasury stock a/c (3000 * 25)		75000
To Additional Paid In Capital a/c (ie excess)		9000

Hence Option D is correct.

It should be noted here that any gains on resale of any treasury stock shall be reported as Additional Paid in capital and not as Gains. Hence Option A, B and E are incorrect. Moreover the corresponding figures to the entry is option C is wrong. Hence this is also incorrect. Thus we're left with Option D which ia correct.