Question

A corporation purchases 1,000 shares of its own common stock for $4,000 on February 13. On April 13, half of the treasury stock was sold for $3,000. On April 26, the other half of the treasury stock was sold for $1,800. The entry to record the April 26 sale would include a:

Answer 1

Answer:

Dr Cash $1,800

Dr Additional paid-in capital - treasury stock $200

Cr Treasury stock $2,000

Explanation:

The sale of treasury stock on April 26 was made on discount. This happens when the company sold the treasury stock lower than its cost. An entry to record it is to debit cash in the amount that the company received ($1,800). Another debit to additional paid-in capital - treasury stock in the amount of $200. And a credit of treasury stock in the amount of $2,000. This transaction will cause to a decrease in the additional paid-in capital - treasury stock account that the company has during its April 13 transaction.