Answer:
2nd February Treasury Stock Dr 840,000
Cash Cr 840,000
(Cash paid $12*70000 = 840,000)
17 March Cash Dr 280,000
Treasury Stock Cr 240,000
Additional Paid-In Capital Cr 40,000
-Cash 20000×$14 = 280,000.
-Treasury stock 20000×$12=240,000)
17 May Cash Dr 200,000
Disc on Capital Dr 100,000
Treasury stock Cr 300,000
Cash 25000×$8=200,000.
Tresury stock 25000×$12= 300,000
Explanation:
For the cost method, the purchase of treasury stock is noted by debiting treasury stock account by the actual cost of purchase. Par value of the shares as well as the amount received from investors when the shares were firstly issued is ignored in the cost method.
Reissuance of treasury share results in credited treasury stock account for the cost at which they were purchased, cash account debited for the amount actually received &at times, the amount received on reissuance of treasury stock is greater than the cost of treasury stock, the difference between the amount received and cost of the treasury stock is credited to additional paid-in capital. It is lower than the cost of treasury stock, when the excess of cost of treasury stock over the amount received is debited to discount on capital account.
