Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
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If Peartree resold 1,000 shares of treasury stock for $24 per share, what journal entry would be required?

Question

Please refer to the following information for Peartree Company:
• Common stock, $1.00 par, 100,000 issued, 95,000 outstanding
• Paid-in capital in excess of par: $2,150,000
• Retained earnings: $910,000
• Treasury stock: 5,000 shares purchased at $20 per share
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If Peartree resold 1,000 shares of treasury stock for $24 per share, what journal entry would be required?

Quizplus · Accepted Answer

When Peartree resells 1,000 shares of treasury stock for $24 per share, it will receive $24,000 (1,000 shares x $24 per share). The entry to record the sale of treasury stock includes a debit to Cash for the amount received, a credit to Treasury stock for the cost of the shares sold, and a credit to Paid-in capital for any excess received over the cost of the treasury shares sold. In this case, the cost of the 1,000 shares sold is $20,000 (1,000 shares x $20 per share), so the entry would be: Debit Cash $24,000, credit Treasury stock $20,000, and credit Paid-in capital $4,000. Therefore, the correct answer is D.

Please Refer to the Following Information for Peartree Company