QUESTION 6 The Wilcox Corporation acquired 300 shares of Its own $40 par value c

Question

QUESTION 6 The Wilcox Corporation acquired 300 shares of Its own $40 par value common stock, all of which had beern issued at par. The corporation paid $13,200 ($44 per share). Three weeks later It reissued all 300 of these treasury shares, at $42 per share. The entry to record the relssuance of these shares, assuming no previous transactions in treasury stock is: on cash 12,600 600 Retained Earnings 13,200 OB, Cash 12,600 12,000 600 Paid-In Capital -Treasury Stock Transactions OC cash 12,600 600 Paid-In Capital Treasury Stock Transactions 13,200 Treasury Stock Common C D. Cash 12,600 mon k Save and Submit to save

Explanation / Answer

The entry to record the reissuance of these shares, assuming no previous transaction in treasury stock is:

(C).

Debit Cash $12,600

Debit Paid-in Capital-Treasury stock Transactions $600

Credit Treasury Stock-Common $13,200

  

Explanation:

When the shares are reissued at $42 , Cash is debited by $12,600.

Further, when earlier Wilcox Corporation acquired 300 shares it had paid (300 Shares * $44 per share) i.e. excess ($13,200-$12,600) $600 from the amount by which it acquired shares so Paid-in Capital Treasury stock transaction account is debited by $600.

And Treasury-Stock common account is credited by the whole amount of $13,200 on its reissue.

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