Prior to June 30,a company has never had any treasury stock transactions.A company repurchased 100 shares of its $1 par 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 journal entry necessary to record the reissuance of treasury stock on July 20?
A)Debit Common Stock $2,300; credit Cash $2,300.
B)Debit Common Stock $20; debit Treasury Stock $2,290; credit Cash $2,300.
C)Debit Common Stock $2,300; credit Treasury Stock $2,000; credit Paid-In Capital,Treasury Stock $300.
D)Debit Cash $2,300; credit Paid-in Capital,Treasury Stock $300; credit Treasury Stock $2,000.
E)Debit Cash $2,300; credit Treasury Stock $2,300.

Question

Quizplus · Accepted Answer

The correct journal entry for reissuing treasury stock above its cost involves debiting Cash for the proceeds ($46 per share * 50 shares = $2,300), crediting Treasury Stock for the cost of the shares being reissued ($40 per share * 50 shares = $2,000), and crediting Paid-in Capital, Treasury Stock for the excess of the reissue price over the cost ($6 per share * 50 shares = $300).

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