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21 November, 05:05

California Surf Clothing Company issues 1,000 shares of $1 par value common stock at $28 per share. Later in the year, the company decides to Purchase 100 shares at a cost of $31 per share. Record the transaction if California Surf resells the 100 shares of treasury stock at $33 per share.

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  1. 21 November, 06:05
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    Dr Cash $3,300

    Cr Treasury share $3,100

    Cr Paid in capital Treasury stock $200

    Explanation:

    When the shares of a company is issued and bought back, it is called Treasury stock, and can be re-issued or cancelled by the company.

    At the time of the purchase

    Treasury shares = 100 * $31

    = $3,100

    Dr Treasury stock $3,100

    Cr Cash $3,100

    At the time of resale

    It is to be noted that the difference in the issuance of Treasury stock is to be transferred to the Paid in capital Treasury stock account.

    Proceeds = 100 * $33

    = $3,300

    Paid in capital Treasury stock.

    = $3,300 - $3,100

    = $200
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