Richard Company paid £23,000 to buy 4,000 shares of its £6 par value ordinary shares for distribution in an executive compensation plan. The stock was originally sold for £25,000. The entry to record purchase includes a

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When a company buys back its own shares, those shares are considered treasury shares and are recorded as a reduction of the company's equity. Therefore, the entry to record the purchase of 4,000 shares would be a debit to Treasury Shares (a contra-equity account) for £23,000. The other choices do not accurately reflect the nature of the transaction. There is no impact on Retained Earnings since the shares were not retired, and there is no premium or additional capital being paid for the shares, so the Share Capital and Share Premium accounts are not affected.

Richard Company Paid £23,000 to Buy 4,000 Shares of Its