A company reissues 400 shares of its own common stock for $20 per share.The company had acquired these shares two months before for $15 per share.The reissuance of this stock would be recorded with a:

Question

Quizplus · Accepted Answer

When a company reissues its own common stock, it records the transaction at the price it sells the shares for. In this case, the company reissued 400 shares for $20 each, so the total amount received was $8,000 (400 shares x $20 per share).

The initial cost of acquiring these shares is not relevant to the reissuance transaction. Therefore, the journal entry to record the reissuance would be:

Debit: Cash for $8,000
Credit: Common Stock for $6,000 (400 shares x $15 par value per share)
Credit: Additional Paid-In Capital for $2,000 ($8,000 cash received - $6,000 par value of shares issued)

Thus, the correct answer is D – Credit to Additional Paid-In Capital for $2,000.

A Company Reissues 400 Shares of Its Own Common Stock