If a corporation\'s stock is purchased by the corporation on the open market but

Question

If a corporation's stock is purchased by the corporation on the open market but is held in treasury and not retired, which of the following is correct? A) A debit will be recorded to the treasury stock account, which is an equity account. B) A credit will be recorded to the treasury stock account, which is an equity account. C) A debit will be recorded to the treasury stock account, which is a liability account. D) A credit will be recorded to the treasury stock account, which is a liability account.

Explanation / Answer

If a corporation's stock is purchased by the corporation on the open market but is held in treasury and not retired, then the follwoing entry needd to be recorded:

Debit the treasury stock and credit the cash.

Treasury stock is reported at the end of shareholders' euity section of the balance sheet. Treasure stock is considered as contra equity accont which normally has the debit balance.

Therefore option A is the correct option.

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