GE buys back 300,000 shares of its stock from investors at $45 a share. Two year

Question

GE buys back 300,000 shares of its stock from investors at $45 a share. Two years later it reissues this stock for $65 a share. The stock reissue would be recorded with a debit to Cash for:

A) $19.5 million, a credit to Treasury Stock for $13.5 million, and a credit to Additional Paid-in Capital for $6 million.

B) $13.5 million, a debit to Additional Paid-in Capital for $6 million, a credit to Treasury Stock for $13.5 million, and a credit to Stockholders' Equity for $6 million.

C) $19.5 million, a credit to Treasury Stock for $13.5 million, and a credit to Gain on Sale of Treasury Stock for $6 million.

D) $19.5 million and a credit to Treasury Stock for $19.5 million.

Explanation / Answer

The journal entry would be :

Casha/c..Dr$19.5million(300,000*65)

To treasury stock $13.5million(300,000*45)

To Additional Paid-in Capital $6million

Hence the correct option is A.

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