Salon Company originally issued 4,000 shares of $10 par value common stock for $120,000 ($30 per share).Salon subsequently purchases 400 shares of treasury stock for $27 per share and resells the 400 shares of treasury stock for $29 per share.In the entry to record the sale of the treasury stock, there will be a

Question

Quizplus · Accepted Answer

When a company reissues treasury stock at a price greater than its cost, the difference between the sales price and the cost is recorded as a credit to Paid-In Capital from Treasury Stock. Additionally, since the common stock is sold at a price greater than the par value, there is also an increase in Paid-In Capital in Excess of Par. Therefore, the entry to record the sale of treasury stock would be:

Debit Cash: 11,600 (400 x $29)
Credit Treasury Stock: 10,800 (400 x $27)
Credit Paid-In Capital in Excess of Par: 1,200 ([$29 - $10] * 400)
Credit Paid-In Capital from Treasury Stock: 800 ([$29 - $27] * 400)

The only answer choice that reflects this is D.

Salon Company Originally Issued 4,000 Shares of $10 Par Value