At the end of the prior year,Atoka Industries reported the following account balances: The treasury stock arose from a purchase of 10,000 shares of common stock for $78 per share.If the 10,000 treasury shares are issued for $50 per share in the current year,what journal entry must be prepared to record the transaction?
A)Debit Cash for $500,000,debit Other Losses for $280,000,and credit Treasury Stock for 780,000.
B)Debit Cash for $500,000,credit Common Stock for $100,and credit Additional Paid-in Capital for $499,900.
C)Debit Cash for $500,000,debit Additional Paid-in Capital for $280,000,and credit Treasury Stock for $780,000.
D)Debit Cash and credit Treasury Stock for $500,000.

Question

At the end of the prior year,Atoka Industries reported the following account balances:  The treasury stock arose from a purchase of 10,000 shares of common stock for $78 per share.If the 10,000 treasury shares are issued for $50 per share in the current year,what journal entry must be prepared to record the transaction?
A)Debit Cash for $500,000,debit Other Losses for $280,000,and credit Treasury Stock for 780,000. 
B)Debit Cash for $500,000,credit Common Stock for $100,and credit Additional Paid-in Capital for $499,900. 
C)Debit Cash for $500,000,debit Additional Paid-in Capital for $280,000,and credit Treasury Stock for $780,000. 
D)Debit Cash and credit Treasury Stock for $500,000.

Quizplus · Accepted Answer

Debit Cash for $500,000 (or 10,000 shares × $50 per share),debit Additional Paid-in Capital for $280,000 [or 10,000 shares × (cost of $78 per share − sales price of $50 per share)],and credit Treasury Stock for $780,000 (or 10,000 shares × cost of $78 per share).

At the End of the Prior Year,Atoka Industries Reported the Following