On January 1, Vermont Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20 per share. On February 1, Vermont purchased 3,750 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1.The journal entry to record the purchase of the treasury shares on February 1 would include a

Question

On January 1, Vermont Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20 per share. On February 1, Vermont purchased 3,750 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1.​The journal entry to record the purchase of the treasury shares on February 1 would include a

Quizplus · Accepted Answer

When a company purchases its own shares and holds them in treasury, the account to be debited is the Treasury Stock account. Therefore, the journal entry to record the purchase of 3,750 shares of treasury stock for $24 per share on February 1 will include a debit to Treasury Stock for $90,000 (3,750 x $24). Option A is incorrect because Treasury Stock is a contra equity account, and therefore, it will be debited. Option C is incorrect because there is no loss in this transaction. Option D is incorrect because there is no gain in this transaction.

On January 1, Vermont Corporation Had 40,000 Shares of $10