Gannon Company acquired 6,000 shares of its own ordinary shares at $20 per share on February 5, 2010, and sold 3,000 of these shares at $27 per share on August 9, 2011.The fair value of Gannon's ordinary shares was $24 per share at December 31, 2010, and $25 per share at December 31, 2011.The cost method is used to record treasury shares transactions.What account(s) should Gannon credit in 2011 to record the sale of 3,000 shares?

Question

Quizplus · Accepted Answer

Under the cost method, when treasury shares are sold, the Treasury Shares account is credited for the cost of the shares sold ($20 x 3,000 = $60,000), and any excess over cost is credited to Share Premium-Treasury ($27 - $20 = $7 x 3,000 = $21,000).

Gannon Company Acquired 6,000 Shares of Its Own Ordinary Shares