In 2017, Hobbs Corp. acquired 15,000 shares of its own $1 par value common stock

Question

In 2017, Hobbs Corp. acquired 15,000 shares of its own $1 par value common stock at $18 per share. In 2018, Hobbs issued 10,000 of these shares at $25 per share. Hobbs uses the cost method to account for its treasury stock transactions. What accounts and what amounts should Hobbs credit in 2018 to record the issuance of the 10,000 shares?

           Treasury           Additional               Retained            Common

            Stock            Paid-in Capital          Earnings             Stock     

a.             $180,000                                       $175,000

b.             $180,000           $70,000

c.                                     $240,000                                         $10,000

d.                                     $170,000                  $70,000           $10,000

Show all work and what formulas you use to calculate your answer.

Explanation / Answer

Journal entry :

So answer is b)

Date account & explanation debit credit Cash (10000*25) 250000 Treasury stock (10000*18) 180000 Additional paid in capital 70000 (To record issuance of treasury stock)

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