Richard Company paid £21,000 to buy 4,000 shares of its £6 par value ordinary shares for distribution in an executive compensation plan.The stock was originally sold for £25,000.The entry to record purchase includes a

Question

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When a company purchases its own shares and holds them, they become treasury shares. The account Treasury Shares is debited for the cost of the shares purchased, which in this case is £21,000. There is no impact on Retained Earnings or Share Premium or Share Capital as the shares are being held in treasury and are not considered to be outstanding.

Richard Company Paid £21,000 to Buy 4,000 Shares of Its