When selling Treasury stock, the treasury stock account is “decreased” with a cr

Question

When selling Treasury stock, the treasury stock account is “decreased” with a credit for the PURCHASE price (originally paid) of the stock, NOT the amount of cash received from the sale. The difference between the original amount paid and the amount received is debited or credited to the “Additional Paid-in-Capital” account.

A company previously reacquired 5,000 shares of its $4 par value stock for $18 per share. It later sells 1,000 of those share for $22 a share.

How much cash will they receive from the sale? 1,000 shares times $22 = __________

How much did they originally pay for the 1,000 shares WHEN THEY PURCHASED THEM?   1,000 shares times $18 = _____________

Complete the journal entry below:

dr. Cash____________________(amount of cash receivedcal’d in i above)

cr. Treasury Stock_________________(amt originally pd.calc’d in ii)

cr. APIC_________________(difference)

A company previously purchased 50,000 shares of treasury stock for a total of $435,000. Write the journal entry when they sell 4,000 shares for $9 a share. Hint: Calculate the price per share originally paid.

Note: There should be 3 lines in your journal entry!! Is the company increasing or decreasing cash with this transaction?

A company has reacquired 4,000 of its 100,000 issued shares for $82 a share. They later sell 800 shares for $75 a share. Write the journal entry to record the sale. Remember: APIC can be debited or credited.

A company has 300 treasury shares with an account balance of $6,000. Write the journal entry if they later sell 80 shares for $18 a share.   Hint: You will need to calculate the per share price of the 300 shares.

Explanation / Answer

1,000 shares times $22 =$22000 Cash 22000       Treasury Stock 18000        Additional Paid-in-Capital 4000 2 Cash 36000 =4000*9       Treasury Stock 34800 =435000/50000*4000        Additional Paid-in-Capital 1200 3 Cash 60000 =800*75 Additional Paid-in-Capital 5600       Treasury Stock 65600 =800*82 4 Cash 1440 =80*18 Additional Paid-in-Capital 160       Treasury Stock 1600 =6000/300*80

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