Apricot Inc. is reacquiring 25,000 common shares. The price is $4.25/share and the average price is $4.00. Assuming that there is a contributed surplus balance of $5,000, the entry to record the transaction would be
A) debit to Common shares, Contributed Surplus, and Retained Earnings and credit to Cash
B) debit to Common shares and Contributed Surplus and credit to Cash
C) debit to Common shares and Retained Earnings and credit to Cash
D) debit to Common shares and credit to Cash

Question

Quizplus · Accepted Answer

The reacquisition price is higher than the average price, so the excess amount is debited to Retained Earnings after using up the Contributed Surplus.