The Vernon Corporation was formed on January 2, 2018. The company sold 20,000 sh
ID: 2583490 • Letter: T
Question
The Vernon Corporation was formed on January 2, 2018. The company sold 20,000 shares of $8.00 par value stock for $20.00 per share. On July 1, 2018, Vernon bought back 4,000 shares of stock for $24.00 per share. The treasury stock was resold on September 1, 2018 for $32.00 per share. Which one of the following is the correct entry to record when Vernon acquires its shares to hold as treasury stock?
Multiple Choice
DR Treasury stock 96,000 CR Cash 96,000
DR Investments 96,000 CR Cash 96,000
DR Common stock 96,000 CR Cash 96,000
DR Retained earnings 96,000 CR Cash 96,000
Explanation / Answer
Entry for shares acquires its shares to held as treasury stock Stock are came in means = Stocks are debited We pay cash against the acquire of shares means cash goes outs and it will be credite Price of the stock = $ 24.00 Per Shares Number of shares = 4,000.00 shares Total Price = $ 96,000.00 So, the treasury stock will be debit with $ 96,000 and cash will be credit with the $ 96,000 Answer = Option 1 = DR Treasury Stock 96,000 Cr Cash 96000
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