XV Corporation has 1,000 shares of treasury stock (common shares).It was originally issued at $15 per share and was reacquired at $10 per share.XV Corporation has decided to formally retire these shares; the current market price is $9.The single-transaction method is used.The entry to record the retirement of the shares should include the following:

Question

Quizplus · Accepted Answer

The entry to record the retirement of the shares should include a credit to Contributed capital from common share retirement for $5,000. This is because the treasury shares were originally issued at $15 per share and were reacquired at $10 per share, resulting in a gain of $5 per share. The total gain on the retirement of the 1,000 shares is therefore $5,000.

XV Corporation Has 1,000 Shares of Treasury Stock (Common Shares)