The shareholders' equity section of Winters Company contained the following balances as of December 31, 2017:
$\begin{array}{|l|r|}
\hline \text { Preferred stock ( } 10 \%, \$ 15 \text { par value, cumulative) } & \$ 1,500 \
\hline \text { Preferred stock ( } 12 \%, \$ 10 \text { par value, noncumulative) } & 1,500 \
\hline \text { Common stock } \$ 1 \text { par value, } 5,000 \text { shares authorized, } & 3,500 \
3,500 \text { issued and } 400 \text { held in treasury) } &\
\hline \text { Additional paid-in capital: } & \
\hline \text { Preferred stock (10\%) } & 1,050 \
\hline \text { Preferred stock }(12 \%) & 1,275 \
\hline \text { Common stock } & 2,345 \
\hline \text { Retained earnings } & 4,256 \
\hline \text { Less: Treasury stock } & \underline{(5,750)} \
\hline \text { Total shareholders' equity } & \$ 9.676 \
\hline
\end{array}$

During 2018, Winters entered into the following transaction: On May 13, the company repurchased 55 shares of its common stock in the open market at $25 per share. Which of the following would be included in the journal entry for May 13?

Question

The shareholders' equity section of Winters Company contained the following balances as of December 31, 2017:
$\begin{array}{|l|r|}
\hline \text { Preferred stock ( } 10 \%, \$ 15 \text { par value, cumulative) } & \$ 1,500 \
\hline \text { Preferred stock ( } 12 \%, \$ 10 \text { par value, noncumulative) } & 1,500 \
\hline \text { Common stock } \$ 1 \text { par value, } 5,000 \text { shares authorized, } & 3,500 \
3,500 \text { issued and } 400 \text { held in treasury) } &\
\hline \text { Additional paid-in capital: } & \
\hline \text { Preferred stock (10\%) } & 1,050 \
\hline \text { Preferred stock }(12 \%) & 1,275 \
\hline \text { Common stock } & 2,345 \
\hline \text { Retained earnings } & 4,256 \
\hline \text { Less: Treasury stock } & \underline{(5,750)} \
\hline \text { Total shareholders' equity } & \$ 9.676 \
\hline
\end{array}$

During 2018, Winters entered into the following transaction: On May 13, the company repurchased 55 shares of its common stock in the open market at $25 per share. Which of the following would be included in the journal entry for May 13?

Quizplus · Accepted Answer

When a company repurchases its own stock, the transaction is recorded by debiting the Treasury Stock account and crediting Cash for the amount paid for the shares. Therefore, the correct option is D, a debit to Treasury Stock for $1,375. Option A is incorrect because it only reflects the cash paid for the shares, but doesn't account for the impact on the equity section of the balance sheet. Option B is incorrect because it would increase the balance in the Common Stock account, which is not appropriate for a stock repurchase. Option C is incorrect because it would decrease the balance in the Common Stock account, which is also not appropriate for a stock repurchase.

The Shareholders' Equity Section of Winters Company Contained the Following