In some cases, particularly when the reissue of treasury stock results from the exercise of employee stock options, the amount paid by the firm to reacquire the treasury shares exceeds the subsequent reissue price.If the firm applied the constructive retirement method, it is unlikely that the reissue price would be so low as to require a debit to _____.

Question

Quizplus · Accepted Answer

When the amount paid by the firm to reacquire the treasury shares exceeds the subsequent reissue price, the firm must record a debit to Additional Paid-In Capital account to reflect the excess paid. If the reissue price is lower than the cost, a credit would be made to Additional Paid-in Capital in excess of par or stated value to the extent of the initial credit balance in the account. Therefore, B is the correct choice.

In Some Cases, Particularly When the Reissue of Treasury Stock