Assume that a company paid $7 per share to purchase 1,800 shares of its $2 par...

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Assume that a company paid $7 per share to purchase 1,800 shares of its $2 par common stock as treasury stock. The purchase o

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Answer 1

Answer #1

The treasury stock are those stocks which represents the number of shares that are repurchased from the open market and purchase of treasury stock results in decrease or reduction in the shareholder's or total equity through the amount paid for the stock.

And the journal entry to be passed is

Treasury stock A/c...........................Dr $12,600

Cash A/c.....................................Cr $12,600

So, in this case,

The company paid $7, in order to purchase 1,800 shares

Amount = Number of shares * $7

Amount =1,800 shares * $7

Amount =$12,600

Therefore, it would result in decrease in total equity by the amount $12,600. Hence, the correct answer is C

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Answer 2

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