Laguna's Corporation purchased treasury stock for $100,000.The journal entry to record the transaction is:

Question

Quizplus · Accepted Answer

When a company purchases its own stock, it reduces the number of outstanding shares available in the market, which increases the value of each share, but it does not affect the equity of shareholders. The entry for recording the purchase of treasury stock is a debit to the Treasury Stock account to reduce the balance of the account and credit to the Cash account. Therefore, the correct journal entry is:

Cash 100,000 
Treasury Stock 100,000

Laguna's Corporation Purchased Treasury Stock for $100,000