A firm owns 1,000 treasury shares which it acquired for $15 per share (par value $1).The firm sells 500 of the treasury shares for $20 per share.Using the cost method, what is the entry to record the sale of the treasury stock using the cost method?

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Quizplus · Accepted Answer

The cost method of accounting for treasury stock involves keeping track of the cost of the treasury shares and any gains or losses when they are sold. In this case, the firm acquired the treasury shares for $15 per share and sold them for $20 per share. The entry to record the sale of the treasury stock using the cost method would be to debit Cash for $10,000 and credit Common Stock-Treasury Shares for the cost of the shares sold, which is 500 shares x $15 per share = $7,500. The additional amount received ($20 per share - $15 per share = $5 per share) is credited to Additional Paid-in Capital-Treasury Stock for $2,500.

A Firm Owns 1,000 Treasury Shares Which It Acquired for $15