GE buys back 300,000 shares of its stock from investors at $45 a share.Two years later it reissues this stock for $65 a share.The stock reissue would be recorded with a debit to Cash for:

Question

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When GE buys back shares from investors, it records a debit to Treasury Stock and a credit to Cash. In this case, GE bought back 300,000 shares for $45 a share, so it would have debited Treasury Stock for $13.5 million and credited Cash for $13.5 million ($45/share x 300,000 shares).

Two years later when GE reissues these shares for $65 a share, it will debit cash for the total amount received ($65/share x 300,000 shares = $19.5 million). It will also need to credit Treasury Stock for the original cost of the shares ($13.5 million) and credit Additional Paid-in Capital for the difference between the original cost and the reissue price ($6 million). Therefore, the full journal entry will be:

Debit Cash: $19.5 million
Credit Treasury Stock: $13.5 million
Credit Additional Paid-in Capital: $6 million

GE Buys Back 300,000 Shares of Its Stock from Investors