Question

Treasury stock represents ______. (Check all that apply.) Multiple select question. stock issued in exchange for treasury bills a contra-equity account the amount paid for stock reacquired and currently held in treasury the amount paid to acquire US treasury stock

Answer 1

Option 3. The amount paid for the stock reacquired and currently held in its treasury.

2) Option 6. Credit common stocks $180,000.

2) Option 8. Debit cash $660,000.

Solution 1:

Treasury Stock represents "the amount paid for stock reacquired and currently held in Treasury".

Hence the third option is correct.

Solution 2:

Price of share = (Common stock + paid-in capital in excess of par) / Number of shares issued.

= ($100,000 + $460,000) / 50000

= $11.2 per share.

Solution 3:

Journal entry will be:

Debit Cash......................$660,000

Credit Common stock....................................$180,000

Credit Paid in capital in excess of par...........$480,000

Hence third, sixth and last options are correct.

Treasury stock is often a form of reserved stock set aside to raise funds or pay for future investments. Companies may use treasury stock to pay for investment or acquisition of competing businesses.

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