On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 2,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a

Question

Quizplus · Accepted Answer

When a company purchases treasury stock, it records the transaction by debiting the Treasury Stock account for the cost of the stock purchased. Therefore, the correct journal entry to record the purchase of 2,000 shares of treasury stock at $24 per share would be:

Debit: Treasury Stock - $48,000 
Credit: Cash - $48,000

Option A is incorrect because it suggests a credit to the Treasury Stock account, which is incorrect. 
Option C is incorrect because it suggests a loss account, which is also incorrect. The sale of treasury stock may result in a gain or loss, but the purchase of treasury stock is not recorded as a gain or loss. 
Option D is incorrect because it suggests a gain account, which is also incorrect for the reasons described above.

On January 1, 20xx, Swenson Corporation Had 40,000 Shares of $10