Prior to June 30,a company has never had any treasury stock transactions.A company repurchased 100 shares of its common stock on June 30 for $40 per share.On July 20,it reissued 50 of these shares at $46 per share.On August 1,it reissued 20 of the shares at $38 per share.What is the balance in the Treasury Stock account on August 2?
A)$5,050 Debit.
B)$2,600 Credit.
C)$100 Credit.
D)$1,200 Debit.
E)$1,200 Credit.

Question

Quizplus · Accepted Answer

- On June 30, the company repurchased 100 shares at $40 per share, which results in a Treasury Stock cost of $4,000 (100 shares x $40 per share) and an increase in the Treasury Stock account balance of $4,000.
- On July 20, the company reissued 50 of these shares at $46 per share, which results in a Treasury Stock cost of $2,300 (50 shares x $46 per share), a decrease in the Treasury Stock account balance of $2,300, and an increase in the Cash account of $2,300 (50 shares x $46 per share).
- On August 1, the company reissued 20 of these shares at $38 per share, which results in a Treasury Stock cost of $760 (20 shares x $38 per share), a decrease in the Treasury Stock account balance of $760, and an increase in the Cash account of $760 (20 shares x $38 per share).
Therefore, the balance in the Treasury Stock account on August 2 is $4,000 - $2,300 - $760 = $940, which is a debit balance. The correct option is D, $1,200 Debit, as there may have been some other entries in the books prior to the ones mentioned in the question.

Prior to June 30,a Company Has Never Had Any Treasury