Bobber Corporation purchased 1,000 shares of its own $1 par value common stock at $10 per share.This was the first time the company had ever purchased treasury stock.Shortly thereafter,Bobber sold 100 shares of this treasury stock at $13 per share.The journal entry to record the sale of the treasury stock would include a:
A)credit to Gain on Sale of Treasury Stock $300
B)debit to Treasury Stock for $100
C)debit to Retained Earnings for $1,300
D)credit to Paid-in-Capital from Treasury Stock Transactions for $300

Question

Quizplus · Accepted Answer

The correct entry includes a credit to Paid-in-Capital from Treasury Stock Transactions for $300 because the sale of treasury stock above its cost increases equity through paid-in capital, not through a gain on the income statement.

Bobber Corporation Purchased 1,000 Shares of Its Own $1 Par