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

Journal entry on September 30

Treasury stock	$20,000 (1,000*$20)
Cash		$20,000

Journal entry on October 2

Cash	$8,400 (400*$21)
Treasury stock		$8,000 (400*$20)
Additional paid in capital - Treasury stock		$400 (400*$1)

Journal entry on October 12

Cash	$11,400 (600*$19)
Additional paid in capital - Treasury stock	$400
Retained earnings (plug)	$200
Treasury stock		$12,000 (600*$20)

The answer is B.