Nelson Corporation has $1 par value Common Stock and has 100,000 shares authorized and 25,000 shares issued. The entry to record Nelson's purchase of 5,000 shares of common stock at $5 per share would include a:
A) debit to Treasury Stock for $25,000.
B) credit to Common Stock $25,000.
C) credit to Paid-in Capital in Excess of Par Value - Common Stock for $20,000.
D) debit to Common Stock $5,000.

Question

Quizplus · Accepted Answer

When a company purchases its own stock, it is recorded as Treasury Stock. Therefore, the entry to record Nelson's purchase of 5,000 shares of common stock would include a debit to Treasury Stock for $25,000. Choices B, C, and D are incorrect because they do not reflect the proper accounting treatment for the purchase of Treasury Stock.

Nelson Corporation Has $1 Par Value Common Stock and Has