Question

On February 1, 2018, Cue Company acquired 1,700 shares of its $1 par value stock for $54 per share and held these shares in treasury. On April 10, 2019, Cue resold all the treasury shares for $57 per share. Which of the following entries would be recorded when Cue Company resells the shares of treasury stock?

Answer 1

Answer:

The answer is:

April 10, 2019:

Dr Cash                               96,900

Cr Treasury stock              91,800

Cr Paid-in capital                5,100

(to record resell of 1,700 repurchase shares at $57)  

Explanation:

While the share was repurchased at $54 each; the Treasury stock account is debited at 54 x 1,700 = 91,800. Thus, when resell takes place, treasury stock account must be credited by 91,800.

Cash receipt is 57 x 1,700 = 96,900. Thus, this amount is debited in Cash Account.

The difference between the Dr Cash and Cr Treasury stock will Credited in to Paid-in Capital Account at the amount 5,100; which is also calculated as 1,700 x ( 57-54).