Question

During Year 1, Long Beach Corporation completed the treasury stock transactions described below: Jan. 2 Reacquired 1,000 shares at $10 per share Feb. 2 Sold 400 shares at $12 per share Prepare the appropriate journal entry to record the sale of the treasury stock on February 2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Answer:

Cash A/c Dr.           400 $\times$ $12 = $4,800

      To Treasury Stock A/c                      400 $\times$ $10 = $4,000

      To Additional Paid In Capital            400 $\times$ $2 = $800

(Sale of treasury stock, on premium of $2)

Explanation:

When originally the treasury stock was purchased then the entry would be:

Treasury Stock A/c Dr.       1,000 $\times$ $10

                  Cash A/c                                              $10,000

Recording purchase of treasury stock.

Now when the stock is sold for $12 each, then the amount of $2 = $12 - $10 = Additional Paid in Capital.

Therefore entry will be:

Cash A/c Dr.           400 $\times$ $12 = $4,800

      To Treasury Stock A/c                      400 $\times$ $10 = $4,000

      To Additional Paid In Capital            400 $\times$ $2 = $800

Sale of treasury stock, on premium of $2