On January 1,2013,Belmont Corporation had 50,000 shares of $10 par value common stock issued and outstanding.All 50,000 shares had been issued in a prior period at $15 per share.On February 1,2013,Belmont purchased 2,000 shares of treasury stock for $18 per share and later sold the treasury shares for $20 per share on March 2,2013.The entry to record the sale of the treasury shares on March 2,2013,would be:

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The entry to record the sale of the treasury shares should include debiting Cash for the amount received ($20 per share x 2,000 shares = $40,000) and crediting the Treasury Stock-Common account for the cost of the shares at the time of purchase (2,000 shares x $18 per share = $36,000). The difference between the sale price and the cost of the shares represents a gain, which should be recorded in the Paid-in Capital, Treasury Stock account, since it relates to the sale of treasury shares that had been acquired using contributed capital. Therefore, Choice B is the correct answer.

On January 1,2013,Belmont Corporation Had 50,000 Shares of $10 Par