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On December 2, ABC Company acquired 1,300 shares of its $3 par value common stock for $25 each. On December 20, ABC Company resold 900 shares for $13 each. Which of the following is correct regarding the journal entry for the resold shares?

a. Credit Additional Paid-in Capital $7,000
b. Credit Treasury Stock $20,000
c. Debit Cash $15,400
d. Credit Treasury Stock $11,000

Respuesta :

anthougo

Answer:

There is no correct statement regarding the journal entry for the resold shares.

Debit Cash $11,700 ($13 * 900)

Credit Treasury $2,700 ($3 * 900)

Credit APIC $9,000 ($10 * 900)

Explanation:

a) Data and Calculations:

Dec. 2 Repurchased 1,300 shares of its $3 par at $25 each = $32,500 (Cash is credited).  Treasury stock is debited with $3,900 while APIC (Additional Paid-in Capital) is debited with $28,600.

Dec. 20, Resold 900 shares of $3 par at $13 each = $11,700 (Cash is debited).  Treasury Stock is credited with $2,700 while APIC is credited with $9,000.  The above transactions are recorded as indicated when using the par value approach.  Since none of the options agrees with the above treatment, there is no correct statement.

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