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4 August, 19:57

On October 1, 2017, Adoll Company acquired 2,900 shares of its $1 par value stock for $35 per share and held these shares in treasury. On March 1, 2019, Adoll resold all the treasury shares for $31 per share. Which of the following entries would be recorded when Adoll Company resells the shares of treasury stock?

a.

Cash Additional 89,900

Paid-in capital Common Stock 11,600

Common Stock 101,500

b.

Cash 89,900

Loss on sale of treasury stock 11,600

Treasury Stock 101,500

c.

Cash 89,900

Additional paid-in capital 11,600

Treasury Stock 101,500

d.

Cash 89,900

Common Stock 2,900

Additional paid-in capital 87,000

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Answers (1)
  1. 4 August, 21:08
    0
    The answer is c.

    Dr Cash Additional 89,900;

    Dr Paid-in capital Common Stock 11,600

    Cr Treasury stock 101,500

    Explanation:

    We have the Treasury stock account has a Debit balance of 35 x 2,900 = $101,500 post resold. As the resold take place, this account should be cleared to 0. Thus, we credit this account by $101,500;

    Cash receipt is 31 x 2,900 = $89,900. Thus, we debit Cash account by the same amount.

    The difference 11,600 (101,500 - 89,900) will be debited into Paid-in capital common stock account; assuming that after the Debit entry is made, the account still have the Credit balance. Otherwise, the excessive Debit amount that made Paid-in capital account's balance less than 0 Credit will be Debit into Retained Earnings account.
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