Prior to June 30, a company has never had any treasury stock transactions. A company repurchased 100 shares of its $1 par common stock on June 30 for $40 per share. On July 20, it reissued 50 of these shares at $46 per share. On August 1, it reissued 20 of the shares at $38 per share. What is the journal entry necessary to record the repurchase of stock on June 30 using the cost method?
A)Debit Common Stock $4,000; credit Cash $4,000.
B)Debit Common Stock $100; debit Treasury Stock $3,900; credit Cash $4,000.
C)Debit Treasury Stock $3,900; debit Paid-in Capital, Treasury Stock $100; credit Cash $4,000.
D)Debit Treasury Stock, Common $4,000; credit Cash $4,000.
E)Debit Cash $4,000; credit Treasury Stock $4,000.

Question

Quizplus · Accepted Answer

The cost method records the repurchase of treasury stock by debiting the Treasury Stock account for the total cost of the repurchased shares and crediting Cash for the same amount.

Prior to June 30, a Company Has Never Had Any