Please refer to the following information for Peartree Company: If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?

Question

Please refer to the following information for Peartree Company:  If Peartree resold 1,000 shares of treasury stock for $24 per share, which of the following statements would be TRUE?

Quizplus · Accepted Answer

When a company resells treasury stock, the proceeds are recorded as an increase in cash and a decrease in the Treasury stock account. In this case, 1,000 shares were sold for $24 per share, resulting in $24,000 in cash inflow. The Treasury stock account would decrease by 1,000 shares multiplied by the cost per share, which is $20 per share (since the shares were originally acquired at $22 per share and $2 was recorded as a contra equity account). Therefore, the Treasury stock account would decrease by $20,000. The Paid-in capital account would not be affected in this transaction.

Please Refer to the Following Information for Peartree Company